The International Monetary Fund warns in a new report about Canada’s high debt levels and higher-than-average pressure on Canadian households’ ability to pay down that debt.
The IMF says in its Global Financial Stability report released Wednesday that these dynamics in Canada’s private non-financial sector leaves its economy more sensitive to tighter financial conditions and weaker economic activity.
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Canada was named along with Australia, Brazil, China and Korea as countries where the debt-service ratio has risen to high levels.
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The IMF also says there was a particularly strong need in these economies for financial sector policy to guard against letting these imbalances grow any further.
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The IMF also notes that in Australia, China and Canada, where the ratio of household debt payments relative to disposable income is highest, it has been coupled with a steep increase in house prices.
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It warns that past experience shows these two factors can create strain and, with a sharp fall in asset prices, can spill over to the economy.
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