Citing weakened trade growth and mounting household debt, the Organization for Economic Co-operation and Development lowered its growth estimate for Canada this year by half a percentage point, down to 1.2 per cent.
The OECD also revised its 2017 Canadian economic growth prediction downward from 2.2 per cent to 2.1 per cent, BNN reported.
In its latest report, the OECD warned that the prevailing environment of cheap credit—which is backed by record-low interest rates—is accelerating home price growth to levels similar or even greater than those seen during the 2008 financial crisis.
“What we’re afraid of in the case of Canada – and clearly when you look at the figures – real estate prices have been growing quite strongly in certain areas such as Vancovuer and Toronto. At the same, household indebtedness is high and growing. These are things of course to worry about,” OECD senior economist Christian Daude said.
However, in moderating the most overheated markets, Daude noted that the calls for monetary policy interventions are misguided, as such tools would be "too blunt and probably have lots of negative consequences for the economy."
"The right thing to do to cool the housing market is through regulations … in a smooth way without affecting too much of the demand side of the economy, where there’s still a lot of slack," Daude suggested.
