The Globe and Mail reports in its Friday, May 17, edition that the rising probability of a recession and a spike in riskier borrowing by Canadian companies are among the growing threats to the country's financial system, the Bank of Canada says.
The Globe's Barrie McKenna writes that the Bank of Canada warned Thursday in its annual Financial System Review that risks to the system have increased "slightly" over the past year, largely because the probability of a severe recession is "elevated and increasing. Global uncertainty is rising and risks to financial stability have edged up in the past year."
The bank blamed the deteriorating financial environment on a slower economy, the U.S.-China trade standoff and persistent weakness in Canada's oil and gas sector.
However, the BOC is not predicting a recession, traditionally defined as two consecutive quarters of falling GDP. Its official forecast, released last month, calls for the economy to grow 1.2 per cent this year and 2.1 per cent in 2020.
TD economist Brian DePratto said, "Risks are only that, without a trigger to turn them into reality." He added that, by definition, the financial system review "should give us a bit of a scare."
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