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The IMF forecasts the Canadian economy will grow 2.4% next year. Stronger growth in the U.S., which the fund projects will expand at a 3.1% pace in 2015, “should support above-potential growth and a broadening recovery” in Canada, it said.

Downside Risks

Still, the risks to the world’s 11th biggest economy are “modestly tilted to the downside,” the IMF said. Faster-than- expected tightening of global credit and a further drop in crude prices are the key threats to the nation’s outlook, according to the fund.

Canadian policy makers have taken steps to cool the housing market and reduce the exposure of taxpayers, even as they have maintained the country isn’t facing a bubble.

Canadian existing home sales rose last month, approaching the highest level in four years, amid gains in Vancouver and Toronto, the Canadian Real Estate Association said this month.

Canada Mortgage & Housing Corp., the nation’s housing agency, said in June it would would stop offering mortgage insurance for multiple-unit condominium construction.

Mortgage Pools

CMHC insurance is fully backed by the federal government. By law, Canadian mortgages that have less than a 20% downpayment must be insured. The government also guarantees 90% of mortgage insurance offered by private-sector insurers.

CMHC also backs pools of mortgages that financial institutions repackage as securities sold to investors.

Chief Executive Officer Evan Siddall said in a speech in September the agency is “evaluating a range of ideas on future improvements to our housing finance system, including risk sharing with lenders to further confront moral hazard.”

The IMF said in its report today that CMHC and private- sector mortgage insurers should consider reducing the amount of bulk mortgage insurance they offer. Financial institutions purchase so-called portfolio insurance to cover pools of mortgages they plan to securitize. CMHC started rationing portfolio insurance in 2012.

The IMF also said policy makers should consider tighter standards such as lower amortization limits on uninsured mortgages, which are growing about 10% a year.

With files from Bloomberg and Reuters