Canada looks stable (as a place to invest) — but cracks are forming beneath the surface of our economy

When global markets wobble, Canadians tend to take comfort in a familiar refrain — we’re stable. Our banks are sound, our institutions steady, our politics dull compared with the chaos abroad.

That image still holds true. In the Henley & Partners Global Investment Risk and Resilience Index 2025 report, Canada ranks at number 11 out of 150 countries, placing it among the world’s safest investment destinations (1). But “safe” doesn’t mean “strong.” Beneath the calm surface, structural pressures — fiscal strain, stagnant productivity, global dependence — threaten to chip away at that resilience.

And the consequences aren’t confined to policy circles or stock exchanges. They ripple into the paycheques, grocery bills and mortgage statements of everyday Canadians.

A new era of risk

“The global political, economic, and social environment that we have relied upon for decades is shifting — rapidly and profoundly,” writes David K. Young in Macro-Economic Development and the Global Resilience Dividend (2).

Technology, geopolitics and climate change now move faster than governments can adapt. What once were “black-swan” shocks — rare, unpredictable crises — have become grey swans: Foreseeable but unmitigated events that reshape the global economy.

For Canadians, that means volatility is no longer the exception — it’s the background noise of daily (and investing) life. Gas prices spike with global conflict. Mortgage rates swing with inflation data. Groceries cost more when droughts hit key exporters.

The result, as Young puts it, is sobering: “We live and work in a riskier world (3).”

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Fiscal risk: Debt, deficits and the cost of stability

At first glance, Canada’s fundamentals look enviable: Low inflation risk, steady currency, and modest exposure to natural disasters. But Henley’s analysts warn that our resilience “is weaker than our risk profile owing to the country’s relatively low Fiscal Policy Space score (4).”

In plain terms, Canada’s debt has grown too large for comfort. Among 40 high-income nations, the Fraser Institute found Canada posted the third-largest rise in government debt since 2019 — and the highest increase in the G7 (5). Ottawa’s plans for expanded defence, housing and infrastructure spending will push that ratio even higher.

Why it matters:

• A government with less “fiscal space” has fewer tools to protect households when the next downturn hits. During COVID-19, emergency benefits and business subsidies cushioned millions of Canadians. But the bill for that relief remains, and another crisis could leave policymakers torn between raising taxes, cutting services or risking inflation through new borrowing.
• For working Canadians, shrinking fiscal room can translate into higher interest rates for longer and less support when jobs disappear. It also means a heavier debt burden passed to future taxpayers — including today’s young adults already priced out of home ownership.

The productivity problem: When stability becomes stagnation

Canada’s five-year average GDP growth sits in the “low” category among peer nations. That’s not just a statistic — it’s the quiet drag on every paycheque. Low productivity means workers produce less output for every hour worked compared with their global counterparts. That suppresses wage growth, limits government revenue, and makes domestic businesses less competitive.

Economist David K. Young reminds readers that “economic scale alone does not guarantee strength. Stability and predictability matter most — they form the foundation of resilience and long-term prosperity (6).” Yet predictability without innovation can ossify into complacency.

For households, the productivity gap shows up as slower wage growth and rising costs of living that outpace income. For government, it means fewer tax dollars to fund healthcare, transit or affordable housing. Without new investment in skills, technology and infrastructure, the “resilience dividend” Canada once enjoyed could turn into a liability.

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Trade dependence: The double-edged sword

Few economies are as intertwined with a single trading partner as Canada is with the United States. That closeness offers stability but limits flexibility.

Henley’s analysts frame this as external risk — vulnerability to global supply and demand. When U.S. consumer demand slows or oil prices collapse, Canadian export revenues shrink. A more fragmented world, where the U.S. and China jostle for influence, magnifies that exposure.

For Canadian workers, this plays out through the job market. Energy-sector layoffs during oil downturns ripple into Alberta towns. Manufacturing shifts in U.S. supply chains affect Ontario plants. Even small retailers feel the squeeze when exchange-rate fluctuations change import prices.

Reducing that dependency through diversified trade agreements and green-tech manufacturing could buffer those shocks. Yet diversification takes time — and political will.

Technological disruption: The AI wildcard

According to Henley’s macro-economic briefing (7): “92% of companies plan to invest in generative AI by 2028,” predicting widespread “disruption — reshaping industries, labour markets, and even governance itself.”

For Canada, an innovation-driven economy on paper, this transformation presents both opportunity and threat.

If leveraged effectively, AI could lift productivity and help offset an aging workforce. But without robust training, reskilling and wage protections, it could deepen inequality — favouring knowledge workers and displacing those in clerical, retail or logistics roles.

For everyday Canadians, that means the next career shock may not come from a pandemic or recession but from an algorithm. Resilience, in this context, is personal as much as national — the capacity to re-learn, re-skill and adapt as technology redefines work.

Climate exposure: A slow-burn economic threat

Henley’s index gives Canada one of the lowest physical-climate-risk scores globally, largely thanks to geography. But the score belies a harsher truth: climate disasters here are intensifying. Wildfires in 2023 forced mass evacuations and shut down energy operations, costing billions. Floods and droughts now routinely disrupt transportation and agriculture. As Henley & Partner analysts warn (8): “high resilience can obscure emerging vulnerabilities, especially in advanced economies now facing political or fiscal pressures.”

That means Canada’s apparent safety could breed complacency.

For workers, the consequences appear as rising home-insurance premiums, unstable farm incomes, and higher grocery costs. For investors, they show up in shifting capital — away from resource extraction toward green infrastructure and adaptation technology.

Institutional strength: Canada’s core resilience

Despite these headwinds, Canada’s greatest advantage lies in its institutions.

The Risk and Resilience methodology lists governance, innovation, investment, and social progress among the key pillars of resilience (9). On most counts, Canada excels.

The country’s independent central bank maintains credibility; its courts uphold contracts; and its social programs — healthcare, pensions, education — form what Henley calls “the human infrastructure that sustains confidence in institutions and markets alike”.

Why this matters: Trust. Stable institutions lower borrowing costs, attract investment, and provide predictability for businesses. They also give citizens confidence that their savings, mortgages and retirement plans are secure even when global turbulence rises.

For the average Canadian household, that stability translates into steady employment, accessible credit, and a reliable safety net in times of crisis. It’s why international capital continues to flow into Canadian assets even when other markets falter.

Resilience as a shared responsibility

True resilience, Henley & Partner analysts stress (10), “is both top-down and bottom-up: guided by sound policy and strengthened by the collective capacity of citizens, communities, and companies.” For Canada, that collaboration has tangible meaning:

• Government: must balance fiscal discipline with strategic spending — investing in infrastructure, skills and clean energy while keeping debt manageable.
• Business: must prioritize innovation and long-term value over quarterly profits, ensuring productivity gains translate into higher wages and sustainable employment.
• Civil society: must maintain the social trust that underpins cooperation — from public-health compliance to support for immigration, diversity and climate action.

In other words, resilience isn’t just built in Ottawa or Bay Street; it’s maintained in workplaces, classrooms and communities across the country.

Adaptation: The new competitive edge

In The New Geography of Risk and Resilience (11), Henley chairman Dr. Christian Kaelin and AlphaGeo founder Dr. Parag Khanna describe today’s world as “Darwinian” — not survival of the strongest, but of the most adaptable.

Nations that learn to “adapt to perpetual uncertainty,” they argue, will attract talent, capital and innovation.

For Canada, adaptation means modernizing infrastructure for a low-carbon economy, fast-tracking housing to retain skilled migrants, and investing in public transit, broadband and education to improve productivity. It also means fostering entrepreneurship in emerging sectors — from clean hydrogen to artificial intelligence — where the next generation of middle-class jobs will form. For working Canadians, this isn’t abstract policy. Adaptation shapes the industries they’ll work in, the affordability of their cities, and the resilience of their retirement savings in volatile markets.

Takeaway: Stability is a strategy, not a guarantee

Canada’s top-tier ranking in the Global Investment Risk and Resilience Index confirms what many already believe: this is still one of the safest economies on Earth. But it’s also a reminder that resilience is earned, not inherited.

As Henley’s analysts note, the countries that thrive will be those that “convert uncertainty into opportunity” through cooperation, innovation and disciplined governance. For Canadians, that means demanding policies — and workplaces — that don’t just shield against risk, but build strength from it. Because in an age where shocks are constant, true security doesn’t come from avoiding change — it comes from being ready for it.

Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Henley & Partners Global Investment Risk and Resilience Index 2025 (1; Henley & Partners: Macro-Economic Development and the Global Resilience Dividend (2, 3, 6, 7, 10); Henley & Partners: Risk and Resilience Defined (4, 8, 9); The Fraser Institute (5); Henley & Partners: The New Geography of Risk and Resilience (11)