This second budget by the Minister of Finance and National Revenue, the Honourable François-Philippe Champagne, is presented as a "nation-building plan". Under the theme Masters of our destiny, this budget plan seeks to strengthen Canada's economic sovereignty in a context marked by protectionism, geopolitical rivalries and rapid technological change. Its challenge: to create an "investment supercycle" by focusing on productivity, entrepreneurship, innovation, energy and major projects.
The government also says it wants to curb spending growth, balance its operating budget in 2027-2028 and keep the deficit-to-GDP ratio on a downward path. However, this announced discipline coexists with substantial investments to stimulate the economy, diversify trade and improve the competitiveness of Canadian businesses.
Future budgets that will remain in the dark red... but no recession on the horizon
After a record deficit of $78.3 billion projected in last year's budget for the year 2025-2026, the result is now estimated at $39.3 billion. This significant reduction is attributable to a higher-than-expected increase in government revenues. In addition, according to the government, "over the next six fiscal years, the deficit is expected to decrease by $34 billion compared to previous projections."
For the current year, 2026-2027, the government is projecting a deficit of $62.3 billion, then $62.5 billion in 2027-2028. The deficit would then gradually decrease to $53.4 billion in 2029-2030 and $52.9 billion in 2030-2031. The deficit-to-GDP ratio is projected to decline over the planning period, from 1.8 per cent in 2026-2027 to 1.3 per cent in 2030-2031. The budget argues that this trajectory makes it possible to finance capital investments while preserving the country's financial fundamentals. It sets two targets: to balance current operating expenditures and revenues in 2027-2028, and then to maintain a declining deficit-to-GDP ratio.
The budget also forecasts an increase in the growth outlook of 1.7% from 2027, 2% in 2028, 2% in 2029 and 1.9% in 2030. This growth in the economy would result from a greater increase in business investment. So, no recession on the radar, in the medium term.
Major economic measures for investment and strategic sectors...
The budget puts businesses at the centre of its growth strategy. Some of the most important economic and sectoral measures include:
- The creation of the Canada Strong Fund, a national sovereign wealth fund with initial funding of $25 billion over three years, which will invest alongside institutional and private investors in major projects and businesses of strategic importance.
- The National Electricity Strategy, supported by more than $50 billion in Budget 2026 investments to expand Canada's electricity grid, support clean technology, attract private capital, and help double grid capacity by 2050.
- Targeted measures for natural resources and sectors exposed to trade tensions, including critical minerals (over $2 billion) and the forest sector ($6.5 billion over six years), to transform Canada's forest sector by strengthening fibre supply, modernizing facilities and boosting productivity, as well as supporting new large-scale projects and major transformations of existing facilities, including biorefineries, biofuels plants and other innovative forest products production facilities), the automotive and steel sectors, as well as tailored regional support for businesses
- Initiatives to accelerate major projects, diversify export markets and modernize Canada's trade finance tools.
… and tax measures to boost productivity, entrepreneurship and innovation
On the tax front, there is a lack of incentives for Canadian small businesses, to give them a real boost. Above all, the government is proposing several incentives to reduce the cost of new investments and encourage the growth of larger companies. Key measures include:
- The Productivity Mega Deduction, whose financial cost is estimated at $36 billion over five years starting in 2026-2027, which would allow businesses to deduct the full cost of certain new investments and would bring the effective marginal tax rate on new investments to 6.4%.
- The Canada Growth Incentive, which would exempt from tax up to $15 million of capital gains realized on the sale of qualified shares, and would relax the rollover deferral of investments reinvested in eligible Canadian businesses, to encourage entrepreneurs and investors to recycle their gains into new growth businesses.
- Expanding the Scientific Research and Experimental Development (SR&ED) program with an investment of $930 million to expand the SR&ED tax incentive program to include certain commercialization-related expenditures, helping Canadian businesses develop new products and technologies and bring them to market.
In short, Budget 2026 is a strong focus on private investment, strategic infrastructure and tax incentives to raise productivity and strengthen Canada's economic self-sufficiency. The success of this approach will now depend on the speed of implementation of measures, the ability to mobilize private capital, and the evolution of a still uncertain global trade environment.
For more information on the tax measures announced in this budget, visit the following pages.
Federal Budget 2026: Key tax measures to know
Our tax experts have analyzed the federal budget. See which measures could affect your personal finances and your business.