REPORT: Alberta and Saskatchewan to lead GDP growth in 2025 and 2026

The shadow of US tariffs is stretching across Canada, creating dark economic uncertainties of varying levels across the country. 

However, in a report released this week, RBC Economics said it still expects the Canadian economy will look better, per capita, than it did in 2024. 

“But we expect escalating tariff risks will significantly derail planned increases in business investment, particularly in the highly trade-sensitive manufacturing sector,” reads the report. “We anticipate both imports and exports will be negatively impacted by threats of a trade war. 

The report says Alberta will lead the country in GDP growth this year and next, followed by Saskatchewan. 

Alberta 

“We continue to expect Alberta’s economic growth to outpace all provinces in 2025, though potential headwinds from US trade tariffs prompted a slight downward adjustment to growth from 2.8% to 2.4%,” says the report. “Relatively strong population gains and increased oil production, supported by the Trans Mountain Pipeline (TMX) expansion, are expected to remain key drivers of growth.” 

Alberta has a close trading relationship with the US, with approximately 89% of its exports crossing south, with energy accounting for the majority at about 82%.

It makes US tariffs a risk to its economy, but the impact is partially offset by higher oil prices paid by US refiners and currency adjustments, rather than a direct hit to oil production, says RBC. 

“Oil production reached a record high in 2024, supported by the TMX expansion. Output is expected to remain strong with the pipeline now in its first full year of operation,” says the report. “Exports through TMX have already reached contracted capacity helping to diversify Alberta’s markets, and boosting the relative price producers receive.” 

Alberta has seen record-breaking interprovincial migration, but RBC expects a slowdown in 2025 to about a 2% increase, “which would be the strongest rate among provinces despite being roughly cut in half relative to 2024,” says the report. 

Before the tariff shadow created uncertainties, businesses and public sector enterprises in Alberta planned to boost capital spending by 8.2% in 2025, according to a Statistics Canada report, though “trade uncertainty could weigh on business investment and hiring going forward,” says RBC, adding “Lower interest rates could bring relief to consumers as household debt pressures ease."

"The introduction of a new 8% personal income tax bracket for those earning up to $60,000 should further support consumer spending, helping mitigate trade turbulence.” 

 Saskatchewan 

“Major construction projects are set to propel Saskatchewan’s economy this year, which we forecast will grow by 1.9%,” says RBC. “Its diversified export markets with a lower-than-average 59% of goods directed to the US, may help moderate the impact of tariffs.” 

“Ongoing major construction projects, like Phase 1 of the Jansen potash mine, are expected to keep the construction sector robust, supporting employment growth, but the trade war casts a dark shadow. The shelving of a major $2-billion canola processing project is stark evidence of the negative impact tariff-related uncertainty can have.” 

“China’s retaliatory tariffs imposed in response to Canada’s duties on Chinese EV’s and metal products last fall add downside risks to the outlook by targeting rapeseed oil, oil cakes, and other agricultural goods,” says the report, adding “these tariffs could impact a relatively small share of Saskatchewan’s total international domestic exports, about 1.5%, or $676 million in export value.” 

The larger risk is if the trade dispute escalates, says RBC.  

“Notably, canola seed exports were excluded from China’s latest tariff list. In 2024, Saskatchewan’s canola seed exports to China were valued at about $2.2 billion, making China its largest export market.” 

Household spending will be supported by lower interest rates and subdued inflation, “contributing to keep growth in Saskatchewan ahead of the Canadian average for a fourth consecutive year.” says RBC. “A relatively tight labour market has kept the unemployment rate lower than all provinces except Quebec, contributing to higher wage growth, which should support household expenses this year.” 

Housing affordability and job opportunities have increased Saskatchewan’s population and created a healthy housing market, says RBC. 

"It’s among the most active in the country in the past year,” says the report. “Home resales rebounded by a solid 8.8% last year and this momentum is expected through 2025 barring a major economic hit from the trade war.”