Despite the alarm sounded by the Bank of Canada about household debt and soaring house prices, the possibility of a recession does not worry the Quebec Minister of Finance, Éric Girard.

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“We have a forecast for 2023 of 2% growth, explained the minister in the corridors of the National Assembly. What the Bank of Canada expressed yesterday is that housing, household debt, these are vulnerabilities, and the tightening of monetary functions is exacerbating those vulnerabilities.”

Mr. Girard was referring to statements by Bank of Canada Governor Tiff Macklem, who said Thursday that household debt and rising house prices put Canada's financial system in an uncomfortable position.

“But that does not mean that there will be a recession there, added the Minister of Finance. The most likely scenario is that there will be moderate growth at 2%.”

In fact, for the scenario of a recession to materialize, it would take the concomitance of a series of factors, explained Tiff Macklem. In addition to household debt and rising house prices, there should be a sharp economic slowdown and an increase in the unemployment rate.

“A loss of income would likely force highly indebted households to significantly cut back on spending to keep making their mortgage payments. Moreover, a major correction in house prices would reduce household wealth and access to credit, especially among the most indebted. If many households find themselves in this situation, there could be broad implications for the economy and the financial system,” Macklem said.