Article content

Canada’s economy faces a major risk through the next three years from how debt-laden consumers cope with higher interest rates, according to economists from three of the country’s largest financial institutions.

Risks in the housing market remain, even after the slowdown in sales earlier this year after the government imposed new regulations, according to Frances Donald, head of macroeconomic strategy at Manulife Asset Management. Consumers still have to prove they can be resilient to higher interest rates, Donald said Tuesday at the Bloomberg Canadian Fixed Income Conference in New York.

We apologize, but this video has failed to load.

tap here to see other videos from our team. Try refreshing your browser, or Household debt will pose major risk to Canada’s economy for next three years, economists warn Back to video

“This is something that we are going to have to deal with for several years,” she said.

Consumers no longer have the capacity to lead Canada through another recession the way they did after the global financial crisis a decade ago, said Beata Caranci, chief economist at Toronto-Dominion Bank. While Canada’s fastest population growth in decades provides some support to demand for housing, high debt levels remain a problem that could exacerbate the next recession, she said.