Canada’s odds of recession remain above 1 in 3, according to the Bank of Canada’s (BoC) Market Participants Survey (MPS) for Q3 2025. The survey of banks, asset managers, and investment firms shows markets still expect a downturn within 6 months—and optimism is eroding even among the most upbeat respondents.
Markets Give 1 In 3 Odds That Canada Enters Recession Within 6 Months
The odds of Canada entering a recession remain elevated, according to the latest MPS. The market sees a 1 in 3 (35%) chance of recession within the next 6 months, unchanged from the Q2 2025 survey. Expectations have eased slightly since Q1 (38%) but remain nearly double the level a year ago. Don’t let the lack of movement fool you—beneath the surface, optimism eroded sharply.
The more troubling data point is the erosion in distribution. The 25th percentile—the most optimistic respondents—doubled their odds of recession within six months to 20% in Q3 2025. The 75th percentile—the most pessimistic—now pegs the odds at 50%, essentially a coin flip.
Canadian Recession Risk Expected To Hit In The Near-Term
Expectations of a recession within the next 6 months stand higher than for any other time frame. The median probability of a recession hitting the economy within 6 to 12 months came in at 30% in Q3 2025, unchanged from Q2 but down sharply from the start of the year. This flattening of expectations suggests that markets view the downturn risk as immediate rather than gradual—if a recession comes, it’s lurking around the corner.
Medium-Term Recession Risk Barely Budges
The probability fades over the medium term, with expectations of a recession within 12 to 18 months at 25% in Q3 2025, unchanged from the previous quarter. Expectations for an 18 to 24-month horizon increased slightly to 23%, up from 20% a year earlier.
The BoC has recently been acting on its own forecasts, which are proving overly pessimistic. These surveys tend to reinforce central bank sentiment, potentially skewing the outlook further toward easing. Much of the data shaping these views is backward-looking, such as GDP—which reports months after the fact. If that 6-month recession forecast proves accurate, it would mean the downturn is already underway.
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