The economic promise – and peril – of higher defence spending

Economists project that ramped-up defence spending will raise Canada's real GDP in 2025 and 2026.

When Prime Minister Mark Carney announced that Canada would commit to NATO’s new defence spending target, he justified the steep increase by pointing to the heightened geopolitical threats facing the country.

But Mr. Carney’s government appears to see an economic opportunity in rearmament as well, suggesting that domestic industries and workers stand to benefit as Canada and its allies look to beef up their military capabilities.

Indeed, economists expect higher defence spending will have a stimulative effect on the economy – at least in the short run – and could contribute to sustained growth if it spurs productivity gains.

The long-term picture is murkier, however. Research suggests the