The Bank of Canada, in its global evaluation, speaks of a “resilient” Canadian financial system which has been able to “overcome significant shocks in recent years, including the pandemic, a period of high inflation and marked increases in interest rates”.
Households, companies, banks and non -banking financial intermediaries have generally managed these difficult periods well, says the Banque du Canada.
Precisely, the household debt ratio compared to income has decreased on average, going from 179 % to 173 %, in the last 12 months, but it remains high compared to the past.
However, “there are homes of tension. The economic repercussions of the pandemic, as well as the high prices of housing attributable to persistent imbalances on this market, led to an increase in the level of debt for a certain number of households and businesses, “explains the report.
The unpredictability of the American administration
However, Canada Bank firmly warns against the growing risks posed by the unpredictability and protectionism of American trade policy, stressing that this is the main short and medium term threat.
We also learn that in the case of a serious and long trade war scenario, this could lead to a real GDP contraction of approximately 5.1 %, a recession of seven quarters, a peak of unemployment of 9.2 %, a reduction in the price of equity of 36 %, and a drop in the price of housing of 26 %.
This scenario is not a forecast, but an illustration of the risks, indicates the financial body.
Even if this war is still young, the Bank of Canada is already putting forward certain impacts. For example, the reference stock market indices have dropped sharply before recovering, and volatility on the stock markets has reached its highest level since the COVVI-19 crisis.
In Canada, uncertainty about the scope and duration of the trade war has also already weighed on the confidence and decisions of consumers and businesses.
