Canada's Remaining Provinces Could Outperform Alberta, Quebec If Both Secede, Capital Economics Says

07:48 AM EDT, 10/16/2026 (MT Newswires) -- Alberta and Quebec's potential secession could reshape Canada's economic outlook, with the remaining provinces potentially in a stronger position than the two newly independent states, according to Capital Economics in a note. Although secession is unlikely in the near future, growing separatist sentiment has raised fresh questions about the future unity of the Canadian federation, said Capital Economics in a Thursday note. "While secession remains unlikely, it cannot be ruled out -- especially once the boost to federalist support from [US President Donald] Trump's annexation threats subsides," wrote Capital Economics North America Economist Bradley Saunders in the note. Secession could cut Canada's workforce and gross domestic product by about one-third, while removing most of its oil and natural gas production and a sizeable share of manufacturing, Bradley added. The impact could be partly offset by continued free trade, businesses moving to the rest of Canada and a weaker Canadian dollar, which would improve the competitiveness of exports from other sectors. Alberta and Quebec may face growing fiscal challenges as federal transfers disappear and they bear the expense of building independent tax systems and institutions, said Capital Economics. Existing deficits could leave them with little choice but to cut spending or borrow at higher costs, slowing economic growth. Meanwhile, the rest of Canada could attract businesses seeking to avoid the uncertainty surrounding secession. However, losing Alberta's energy resources and facing new trade barriers across the border could weigh on Canada's economy over the longer term, it added.