Economy

Canadians’ love affair with debt leaves economy vulnerable, Philip Cross warns

A report by the Macdonald-Laurier Institute says that the ratio of total debt outstanding to nominal GDP surged 36.3 per cent in the last two years. Canadian Press

TORONTO — A report by the Macdonald-Laurier Institute says Canadians’ willingness to take on debt is leaving the country’s economy vulnerable to downswings.

Philip Cross, the institute’s Munk senior fellow, writes that all sectors of the economy — households, governments and businesses — are taking on more debt.

The report says that the ratio of total debt outstanding to nominal GDP surged 36.3 per cent in the last two years.

Earlier this month, Statistics Canada reported that household credit market debt as a proportion of household disposable income slipped to 166.9 per cent in the first quarter.

That’s down from 167.2 per cent in the fourth quarter of last year.

The agency said that translates to $1.67 of debt for every dollar of disposable income.

“The risk of debt is that it requires payments even when incomes slow or prices decline, as the U.S. and many European and emerging market nations learned in recent years despite low interest rates,” Cross writes.

[“Source-financialpost”]

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