Canada faces ‘significant risks’ from housing, trade tensions, says IMF

Canada’s economy is confronting “significant risks” as high stress from trade tensions with a U.S. and a hazard of improvement in a housing marketplace weighs on growth, according to a latest opinion from a International Monetary Fund.

The Washington-based group pronounced on Monday that policymakers need to “rebuild process buffers” and forge forward with structural reforms to boost Canada’s tellurian competitiveness.

“Economic stress is high due to trade tensions, doubt about a outcome of NAFTA negotiations, and a impact of a U.S. Tax Cuts and Jobs Act on Canada’s medium-term competitiveness,” a IMF pronounced in a report. 

“Near-term expansion will be upheld by aloft oil prices and clever U.S. growth, though diseased capability continues to import on longer-term prospects.”

Canada’s sum domestic product (GDP) could be reduced by 0.4 commission points or some-more if a U.S. and Canada destroy to strech a NAFTA agreement and trade between a dual countries reverts behind to World Trade Organization (WTO) rules, a IMF said.

Added to that, a IMF expects expansion in a Canadian economy to delayed to 2.1 per cent in 2018 and afterwards dual per cent in 2019, from 3 per cent final year.

“Tax cuts and stronger supervision spending in a U.S. are approaching to support direct for Canadian exports in a near-term and minister to a squeezing of a stream comment deficit,” it said. 

“Over a medium-term, diseased outmost competitiveness, indolent work capability growth, and race aging are approaching to extent intensity expansion to about 1¾ per cent, significantly reduce than a chronological average.”

‘Less attractive’

The warning from a IMF comes as trade tensions between a dual countries hit a heat representation final week when a U.S. slapped aluminum and steel tariffs on Canadian imports after an initial exemption. The Canadian supervision afterwards retaliated with surtaxes of a possess on $16.6 billion value of U.S. goods.

The IMF said external risks to Canada’s economy are now “more acute” than in a new past as a outcome of process changes in a U.S., along with a fallout from NAFTA talks.

“Likewise, a medium-term impact of reduce taxation rates in a U.S. could make Canada a reduction appealing end for investment, heading to heightened doubt about Canada’s medium-term expansion prospects,” it said.

Meanwhile, a pivotal domestic risk to a economy is a “sharp correction” to a housing marketplace that could be triggered by faster-than-expected arise in debt seductiveness rates, a group said.

“While a banking complement is profitable, it is heavily unprotected to domicile and corporate debt,” a IMF said. “In this context, risks to financial fortitude and expansion could emerge, if a residence cost improvement is accompanied by a arise in stagnation and pointy contraction in private consumption.”

Data from a Toronto Real Estate Board on Monday showed that home sales in Canada’s largest city — a Greater Toronto Area — fell some-more than 22 per cent in May, compared to final year.

Meanwhile, a Real Estate Board of Greater Vancouver pronounced that home sales in Metro Vancouver — the country’s many costly skill market — fell some-more than 35 per cent in a same period.

The Bank of Canada is widely approaching to lift a benchmark seductiveness rate in July.

Article source: http://www.cbc.ca/news/business/canada-imf-tariffs-trade-1.4690904?cmp=rss