Top 5 risks facing Canada over the next two years

In an increasingly interconnected world, Canadians have become acutely aware of the variety of global risks that impact their country’s social, economic, and political stability. The uncertainty caused by the current US administration adds to the complexity of navigating these risks, particularly in the realm of trade and economic policies. With insights from the World Economic Forum's (WEF) Global Risks Report 2025 and Zurich Insurance, this article delves into the top five risks pressuring Canada over the next two years: economic downturn, labour and talent shortage, inflation, poverty and inequality, and the adverse outcomes of artificial intelligence technologies, misinformation, and disinformation.

1. Economic downturn

Economic downturn, a state characterized by recession or stagnation, poses a significant threat to economic stability worldwide. The WEF's 2025 Global Risks Report highlights the potential for a prolonged global recession driven by geopolitical tensions, climate change impacts, and systemic financial risk factors.

For Canada, an economic downturn could result in decreased consumer spending, reduced investments, and increased unemployment rates. The country's dependency on natural resources and trade makes it particularly vulnerable to global market fluctuations.

Additionally, current and potential US tariffs materially add to this risk. “With a significant focus on current steel, aluminum, and auto tariffs and the April 2 deadline for implementing across-the-board tariffs signaled by the US administration, these trade policies have introduced a level of uncertainty, already disrupting the strong trade relationship between Canada and the US, increasing uncertainty and impacting confidence,” states Lewin. Tariffs on key exports could severely impact Canadian industries, leading to economic strain.

To mitigate these adverse effects, the Canadian government is pursuing a negotiated solution with the US administration, while also focusing on economic diversification and robust fiscal policies. Developing strategies to manage the risks associated with US tariffs is a key part of this approach.

2. Labour and talent shortage

A labour and talent shortage is another critical challenge in Canada.

According to Statistics Canada, the birth rate in 2024 was 10.006 births per 1000 people, a 0.66% decline from 2023. An aging population and declining birth rates contribute to a shrinking workforce, exacerbating the talent gap in various industries.

The WEF report highlights the global nature of this issue, as countries compete for skilled workers in an increasingly competitive labour market. In Canada, sectors such as healthcare, technology, and engineering are particularly affected. “Addressing this risk requires comprehensive strategies,” argues Lewin. “These include immigration policies that attract skilled workers, investment in education and training, and creating an inclusive work environment to retain talent.”

3. Inflation

With the inflation rate now at 2.6 %, inflation remains a pressing concern for Canada, directly impacting cost of living and economic stability.

The WEF report highlights inflationary pressures arising from supply chain disruptions, increased energy prices, and monetary policies. Inflation can erode purchasing power, reduce savings, and create uncertainty for businesses and consumers alike, while retaliatory tariffs by Canada in response to US tariffs may also further exacerbate inflation, potentially leading to increased costs for imported goods and raising prices for consumers that add to the cost of living. “Proactive monetary policies, vigilant monitoring of price trends, and measures to enhance supply chain resilience can act as key strategies to manage inflationary risks,” Lewin suggests.

4. Poverty and inequality

Poverty and inequality, both in terms of wealth and income, present significant social and economic challenges. According to Statistics Canada, the Canadian poverty rate increased for a second consecutive year in 2022, increasing 2.5 percentage points from 2021 and 3.5 percentage points from 2020. This represents 1.4 million more people living in poverty in Canada in 2022 compared to 2020.

The WEF report highlights the widening gap between the rich and the poor as a critical global risk, with indigenous communities, marginalized groups, and low-income families disproportionately affected. This causes significant impacts to social cohesion and political stability. “Advocating for inclusive economic policies, targeted social programs, and investments in education and healthcare help address these disparities,” states Lewin. “Reducing poverty and inequality is essential for fostering a more equitable and prosperous society.”

5. Adverse outcomes of artificial intelligence technologies and misinformation

The rapid advancement of artificial intelligence (AI) technologies brings unprecedented opportunities to revolutionize industries and improve efficiency, but also poses significant risks if not properly regulated. Although AI supports many roles, the WEF's 2025 report warns of the adverse outcomes, including job displacement, ethical dilemmas, and security threats. In Canada and many other countries, integrating AI technologies may lead to job losses in certain sectors, exacerbating the labour and talent shortage.

Misinformation and disinformation also continue to pose a rising concern. Representing a growing threat to Canada's social fabric and democratic processes, the WEF report highlights the pervasive nature of false information amplified by social media and digital platforms. In Canada, misinformation can undermine public trust, fuel polarization, and hinder effective governance, highlighted by the detrimental impact of COVID-19 pandemic misinformation on public health efforts.

Zurich emphasizes the importance of establishing robust regulatory frameworks, promoting ethical AI practices, and investing in workforce reskilling. To combat misinformation and disinformation effectively, comprehensive media literacy programs, robust fact-checking mechanisms, and collaboration between government, technology companies, and civil society are essential.

Climate concerns continue to dominate over long-term

Earlier this year, CatIQ, Canada’s insured loss and exposure indices provider, announced that Canada faced an unprecedented $8.5 billion in insured losses in 2024, marking the costliest year for severe weather in our history. Although not mentioned in Canada’s top 5 risks over the next two years, extreme weather events are anticipated to become even more of a concern than they already are, with this risk being top-ranked in the 10-year risk list for the second year running. Environmental risks have become the greatest source of long-term concern and are projected to intensify over the next decade, according to the WEF report. These risks emphasize the urgent need for long-term strategies to safeguard ecosystems, secure resources, and mitigate climate-related impacts. Addressing these challenges requires a global commitment to sustainability and innovative approaches.

An interconnected risk landscape

It is crucial for policymakers and businesses to adopt a long-term perspective and consider the broader context when shaping policy, rather than addressing risks in isolation. Lewin explains, “These risks create a domino effect – AI has the potential to increase inequality by favouring capital and investments over labour. This, combined with misinformation, foments nationalism. Nationalism can lead to geopolitical issues and isolationist economic policies as well as pressure to restrict immigration, which can result in further economic challenges.”

By recognizing the interconnected nature of these risks, more comprehensive strategies can be developed to address them effectively.

Path forward

Canada faces a complex array of global risks that require proactive and multifaceted strategies. Economic downturns, labour and talent shortages, inflation, poverty and inequality, adverse outcomes of AI technologies, misinformation, and disinformation and overarching climate concerns are critical challenges that demand attention. By leveraging insights from the WEF's 2025 Global Risks Report and Zurich Insurance, Canada can develop resilient policies and initiatives that help navigate these risks and ensure a stable and prosperous future for Canadians.