The macro dilemma
Canada’s fiscal position is stabilizing but fragile. Public debt stands at 43% of GDP, and debt servicing costs have risen to $52 billion — surpassing defense and EI combined. Meanwhile, productivity and private investment remain soft.
| Metric | 2019 | 2024 | 2025 (est.) | Source |
|---|---|---|---|---|
| Federal debt-to-GDP | 31 % | 42 % | 43 % | Finance Canada |
| Program spending ($ bn) | 375 | 508 | 516 | PBO |
| Debt service cost ($ bn) | 26 | 49 | 52 | PBO |
Fiscal pressure points
- Health transfers and infrastructure consume growing shares of new spending.
- Public-sector hiring continues to outpace private job creation.
- Revenue growth moderates as commodity prices stabilize.
What leaders can do
- Expect fiscal drag. Plan for modest public investment multipliers.
- Anticipate tax shifts. Budget for higher carbon and capital-gains burdens.
- Position as a co-investor. Seek PPPs in infrastructure and clean energy.
- Model government-payment risk. Cash flow delays are rising in federal contracts.
Arcus Insight: Fiscal credibility is now a competitiveness variable. Businesses that align with disciplined public spending will outlast stimulus-dependent peers.