Now Reading
The financial system is helping Canadians, but risks remain

The financial system is helping Canadians, but risks remain

The Bank of Canada took a look at the recent uptick in new COVID cases to determine what the Canadian economy will look like over the coming months.

“Along with actions by the government and the Bank of Canada, a resilient financial system is helping Canadians through the COVID‑19 crisis. But it will be a long, slow climb to get everybody back to work. A full recovery from the crisis will take time, and many risks remain.

The longer the pandemic threatens jobs and incomes, the greater the risk of trouble for households with a lot of debt. Government support programs have bridged the financial gaps for people through the crisis, and lenders have been flexible about payments. The six-month deferrals that financial institutions offered are ending, though, so the next few months will be crucial.

Businesses are also finding it hard to cover debt payments with lower revenues, especially those in service industries such as restaurants and hotels. This too could become a bigger issue the longer the recovery takes.

Canada’s financial system has shown its resilience. It continues to work as a shock absorber, helping Canadian households and businesses deal with the economic impact of the pandemic.”

Read more about how the Bank of Canada has taken action since the crisis began.

While low interest rates support recovery, they could have side effects later

Higher household, corporate and government debt arising from the necessary measures to get through the crisis today will affect how vulnerable the financial system is in the future.

Low interest rates support the housing market, and that’s helping the economy recover from the crisis. Still, we and other policy-makers will watch for signs that:

  • housing prices are rising due to speculation, or
  • buyers are taking on more debt than they can afford.

The bottom line is that the private and public sectors together need to be acutely aware of financial system risks and vulnerabilities as the economy recovers.”

What's Your Reaction?
Don't Agree
0
Happy
0
In Love
0
Not Sure
0
View Comments (0)

Leave a Reply

Your email address will not be published.

© 2019 The Bay Observer. All Rights Reserved.

Scroll To Top