07:06 AM EDT, 05/22/2025 (MT Newswires) -- Canadian economic growth is expected to struggle this year as the uncertainty surrounding the trade war with the United States and the reality of any U.S. tariffs bite confidence and business investment, said Bank of Montreal (BMO).

The bank forecasts 1.0% real gross domestic product growth in 2025, down from 1.5% in 2024. A modest contraction in the economy can't be ruled out through the middle stages of the year, before growth staggers back toward potential through 2026.

The tariff situation between the U.S. and Canada is still evolving, so some forecast revisions should be expected, pointed out BMO.

On the positive side, past Bank of Canada easing continues to ripple through the economy and interest rates should fall gradually further through the rest of the year, stated BMO. A "significant" wave of federal fiscal stimulus will begin to roll out, including income tax cuts and "hefty" infrastructure spending.

According to the bank, these are the provincial highlights:

-- All provinces are expected to see growth slow in 2025, but the regional disparity will widen notably.

-- British Columbia is expected to outperform the national average given low U.S. trade exposure.

-- Alberta and Saskatchewan look to lead the country with growth near 2%.

-- Central Canada will remain a weak spot as growth is pegged around 0.5%. The trade war and associated decline in confidence will weigh heaviest in that region.

-- Atlantic Canada remains well supported by population growth and construction activity.

-- The provincial budget season has ended with the combined deficit on track to widen to 1.4% of GDP in FY25/26. While that is still manageable, it marks a fourth straight year of deterioration.

-- With the federal parliamentary election now wrapped up, BMO can expect to see a surge in spending that could take some pressure off rising provincial borrowing.