BDC: Canada 2026 Economic Outlook - Defence Sector Expansion and Cost Pressures

# BDC: Canada 2026 Economic Outlook - Defence Sector Expansion and Cost Pressures

Summary

The Business Development Bank of Canada (BDC) projects 2026 will be another challenging year for many Canadian businesses due to sustained cost pressures, while identifying defence sector expansion as a primary growth opportunity. The Canadian government has committed to significantly increasing defence spending and building a domestic defence supply chain to reinforce national sovereignty — opening billions of dollars in development opportunities for businesses.

Details

According to the [BDC 2026 Economic Outlook](https://www.bdc.ca/en/articles-tools/blog/canadian-economic-outlook-for-2026), significant cost pressures are expected to weigh on Canadian businesses throughout 2026.

Key drivers of cost pressure:

Tariffs and retaliatory tariffs stemming from ongoing trade tensions

Rising costs from supply chain restructuring

Labour-related cost increases

However, the defence sector is projected to expand significantly from 2026 onward. The Canadian government has pledged a substantial increase in defence spending as part of its sovereignty agenda. With a parallel focus on building a domestic defence supply chain, billions of dollars in procurement and development opportunities are becoming available to qualifying businesses.

The [BDC Entrepreneur Outlook](https://www.bdc.ca/en/articles-tools/blog/what-can-canadian-entrepreneurs-expect-for-2026) also provides analysis of what Canadian entrepreneurs can expect heading into 2026.

Key Data

GDP Growth: ~1% (2026 BDC forecast)

2025 Growth: 1.2%

Defence Sector: Billions in planned investment

Cost Pressure Drivers: Tariffs, supply chain disruption, labour costs

Rise Partners Implications

Canada's defence sector expansion presents a direct market entry opportunity for Korean defence industry firms. We recommend actively pursuing strategies to integrate Korea's defence export capabilities (K-Defence) into Canada's emerging domestic defence supply chain.

The government's push to build a national defence supply chain signals demand for components, materials, and equipment — making Canada entry a viable consideration for Korean SMEs in the defence sector.

--- Source: https://www.bdc.ca/en/articles-tools/blog/canadian-economic-outlook-for-2026