Business 2179 Views

Canada’s High Debt Level a Source of Worry Says New IMF Report

The International Monetary Fund’s recent report warns about the rising debt levels of Canada which pose higher-than-average pressure on Canadian household’s ability to pay down. The Global Financial Stability report released by the IMF on Wednesday revealed that the dynamics in Canada’s private non-financial sector opens its economy to weaker activity and tighter conditions.

Other countries pinpointed to have a high debt-service ratio include Brazil, Australia, Korea, and China. The IMF advised that it was paramount for the financial sector of these economies to come up with policies that will guard the imbalance from growing further – which could have dire consequences on their economies.

The IMF further observed that in countries like China, Australia, and Canada where the ratio of household debt payments relative to disposable income has risen to great heights, there has also been a coupled, steep increase in the prices of homes. Borrowing inferences from past experience, the IMF said the combination of the two factors could create strain which, with a sharp fall in the prices of assets, can spill over to the economy.

The warning is coming on the heels of Canada’s rising job market is a serious source of concern. In a more cheering development, the IMF also estimates that Canada’s GDP could rise to three per cent in this quarter of the year from the 0.5 per cent in July figures.

The International Monetary Fund’s estimate for Canada’s economic growth rate for this year and 2018 puts it near the top of the pack among advanced economies including countries like the United States, Germany, UK, France, Japan, and Italy.

The estimates released by the Washington-based International Monetary Fund is a lot similar to the estimates of the Paris-based OECD which also tipped Canada to be at the top of the G7 countries’ economies this year.

The International Monetary Fund says Canada’s accelerated growth reflects reduced drag from lower oil and gas prices with assistance from government spending and central bank policies. Projections for next year shows that the IMF expects Canadian year-on-year growth rate to slow to 2.1 per cent which is still better than the 0.2 per cent recorded in the July update from the IMF. This also will leave Canada in the second spot among the G7 nations, just behind the United States which is projected to have a GDP of 2.3 per cent.

In the past four years, the top spot has been occupied by a different G7 nation. Canada’s dominance in 2017 is one that was unforeseen. The United Kingdom clinched to the fourth position despite a unanimous vote to leave the European Union. Surprisingly, the vote didn’t have unexpected downturn on the nation’s economy as widely speculated by analysts.

In 2016, Britain was the second-fastest growing economy, bested narrowly by Germany. The IMF said it revised Canada’s 2017 outlook following strong economic growth in the first quarter and a dogged “resilient second-quarter activity”. Undoubtedly, Canada needs stronger economic policies and bilateral negotiations to sustain the gains made so far. 


There are 0 comments on this post

Leave A Comment