Canada’s economy could grow exponentially by 2035 if businesses fast-track their artificial intelligence adoption and respond to growing climate change threats, according to a new study from PwC Canada. The report, which explores ways to unlock economic growth, forecasts that with swift action to close the AI adoption gap, Canada’s GDP could reach as much as $3.65 trillion by the end of the next decade. The report notes that Canada’s 2023 GDP was $2.89 trillion.
The study outlines three growth scenarios, each based on how quickly key industries adapt to technological advancement, climate change, geopolitical tensions, and demographic shifts. The most optimistic scenario, which projects a 9.3% GDP boost over baseline expectations, hinges on a cooperative global approach to AI adoption and public trust in cybersecurity. Nochane Rousseau, national managing partner at PwC Canada, expressed confidence in this scenario but noted that there is currently a lag in AI adoption in Canada, which is about three-quarters of U.S. adoption rates.
Navigating the AI Adoption Gap
The report suggests that narrowing the AI adoption gap will require new investments and government support. Companies would need to devote more resources to research and development and consider new approaches to scaling innovation. Rousseau said that while Canada was one of the initial players in AI, the challenge for the country is the “commercialization of those technologies.” Even if Canada’s economy realizes the most optimistic scenario, it would still lag behind the U.S., which is expected to see a potential 14% boost over its expected baseline in the next decade.
The middle scenario, which assumes that global decarbonization efforts fall short and AI adoption lags, projects a 6.9% GDP boost, or $3.57 trillion. The least optimistic forecast, which assumes geopolitical tensions and a lack of trust in technology, pegs GDP growth at just 2.1% above baseline, or $3.41 trillion.
Opportunities in Key Sectors
The report identified mining, technology, and defense as key sectors that can benefit from AI adoption and government policies. Since taking office, Prime Minister Mark Carney has unveiled major spending plans for national defense to help Canada meet the NATO defense spending benchmark. In June, Canada and its NATO allies agreed to increase their defense spending target to 5% of annual GDP by 2035, which would see Canada’s annual defense budget increase to roughly $150 billion. Rousseau said this presents a “very critical opportunity to capture the value around the defence opportunity.” For example, a Canadian miner could provide materials for magnets and semiconductors used in military equipment. The mining sector could also benefit from AI and quantum computing to accelerate assessments and permitting processes. The report suggests that the government could establish a procurement policy that prioritizes buying goods and services from Canadian AI companies, which would help to grow the industry.
What The Author Thinks
The PwC report is not just a forecast but a call to action for Canadian policymakers and businesses. The report correctly identifies that in today’s global landscape, economic growth is inextricably linked to technological adoption and geopolitical strategy. The ambitious GDP targets are achievable, but only if the government and private sector can overcome a historical lag in innovation and commercialization. The report’s message is clear: Canada must move beyond simply being a hub for AI talent and become a leader in applying that talent to its key industries, or risk being left behind. This will require a concerted effort to foster trust in AI among businesses, attract skilled workers, and implement policies that support domestic innovation and growth.
Featured image credit: micheile henderson via Unsplash
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