The following piece, by ICBA Chief Economist Jock Finlayson and consulting economist Ken Peacock, was first published in the print edition of Business in Vancouver on February 17, 2026.
Six weeks into what looks likely to be another turbulent year, what lies ahead for our struggling economy?
By any measure, 2025 was a bumpy ride. Both Canada and B.C. lost economic momentum, with GDP growth cooling, job creation slowing, and real estate activity in the doldrums – especially in Ontario and B.C. Fortunately, consumer spending held up surprisingly well and interest rates inched lower, helping to offset the weaknesses in business investment, exports, and home sales.
Clearly, the shock of Donald Trump’s tariffs and his quixotic quest to dismantle the post-war global trading system has been a gale-force economic headwind for Canada – even though some 80 per cent of our southbound exports are still entering the U.S. tariff-free. A priority for the Carney government must be to navigate the looming review of the Canada-U.S.-Mexico Agreement (CUSMA), with the goal (or at least the hope) of retaining some margin of advantage for Canadian goods in the giant American economy. Trade diversification is well and good, but it will take decades to move the dial significantly on the geographic structure of Canada’s trade. In the meantime, avoiding a broad rupture of trade relations and commercial ties with the United States is imperative.
Canada’s economy sagged over the latter months of 2025, and although Statistics Canada doesn’t produce real-time quarterly GDP estimates for the provinces, we believe the same was true in B.C. We anticipate further declines in both Canadian and B.C. exports this year, along with continued sluggish private sector investment.
For 2026, we forecast economic growth (after inflation) of 1.4 per cent in B.C., similar to last year. Growth could be weaker if government spending – which has been B.C.’s primary growth engine – is curtailed, amid the province’s brewing fiscal crisis. The unemployment rate is on track to tick higher, albeit not dramatically so. With the population now shrinking given recent shifts in Canadian immigration policy and an accelerating exodus of B.C. residents to Alberta and elsewhere, there is little underlying growth in the labour force. This should keep a lid on the unemployment rate, even as more employers scale back hiring or start laying off workers.
We see B.C. housing starts dropping sharply over 2026-27, as developers continue to pull back from what can only be described as an exceptionally difficult market. But the resale market may perk up slightly after a dismal 2025. And business investment could get a boost if several of the energy, mining and infrastructure projects being touted by the B.C. government move forward – although the most significant economic impacts won’t show up until 2027-28 or later. On the other hand, massive deficits and the skyrocketing debt accumulated by the Eby government mean that Victoria is in no position to ride to the rescue of a faltering economy.
How should governments respond to today’s unsettled economic picture? Neither Canada nor B.C. are facing a deep recession or anything equivalent to the chaos unleashed by the pandemic in 2020-21. Thus, there is no argument for a rapid-fire expansion in the size and cost of government -- especially with public sector debt already on a vertiginous upward trajectory.
For the federal government, we believe job one is to do what it can to lessen uncertainty around the future of Canada-U.S. trade. Until Canadian businesses, investors, and workers know what the trade landscape looks like, the economic outlook will remain cloudy.
Closer to home, the top priority for B.C. policymakers is to improve the “hosting conditions” for business growth and private sector capital formation after a long stretch of stagnant living standards and escalating government interventions across the economy. In our view, this will require a substantial overhaul of the province’s approaches to taxation, regulation, energy policy, the management of Crown land, and Indigenous reconciliation. Significant changes in these areas will be necessary if the Eby government is serious about making B.C. a more attractive location for companies, investors and entrepreneurs.
The last decade confirms that prosperity and economic opportunity cannot be built on the back of ever-expanding government, chronic deficits, and relentless political tinkering with the economy. It is past time for something different. Even after 8.5 years of NDP rule, British Columbia remains a largely market-based economy – where the private sector rather than the state is responsible for the bulk of production, employment, investment, innovation, and exports. This insight should inform the design and delivery of public policy in the province going forward.