Canada suffered only a mild recession in 2009, largely because its tightly regulated banks refrained from binging on subprime debt. High oil prices underpinned a comparatively strong recovery. Now it seems that trouble may only have been delayed rather than avoided, says The Economist. While American households paid off debt after the crisis, Canadian consumers kept borrowing.
Consumer debt is now a record 165% of disposable income, much of which has been splurged on “scarily overpriced” houses: judging by the long-term average, prices are 34% overvalued measured against disposable income, or 89% compared to rents.
Now that the oil boom is over, the debt pile “casts an ominous shadow”. The impact of any recession in emerging markets, or the country’s biggest trading partner, America, would be “magnified” by the country’s own credit bubble.