Poloz: Economy faces 'fender benders,' but we're not headed into a recession
Bank of Canada Governor Stephen Poloz isn't buying into a prominent Bay Street economist's recent warning that Canada could slide into recession next year, while likening risks to the economy as being akin to "fender benders," rather than major shocks.
"We're certainly not expecting a recession in 2019," Poloz told CTV News Chief Anchor Lisa LaFlamme in an interview late Monday. "Our fundamentals are quite solid, so the things that we're facing are more like fender benders than big events."
Poloz's comments come after Gluskin Sheff + Associates Chief Economist David Rosenberg warned in a recent interview with BNN Bloomberg that the risks of a recession next year are "higher than a lot of people think."
Poloz told LaFlamme trade uncertainty is the most important risk facing Canada's economy, noting this country is already "collateral damage" in the ongoing dispute between the United States and China.
"Trade and investment is already slowing internationally as a result of the trade war that's already started and the prospects that there may be more," he said. "That would be a slowing in all economies and higher prices because tariffs raise prices. So there's a risk there that we have rising inflation at the same time as slowing economies. There are no macroeconomic tools to fix that combination."
However, Poloz noted it's important not to assume that a worst-case scenario is the most likely to unfold.
"Right now, everyone is talking about the gloom scenario, but we've seen signs of optimism in recent weeks that [China and the U.S.] are making progress behind the scenes. And if they do resolve all of that, well -- that will be a source of brand new lift to the global economy and I think then we can see this expansion continue on for quite some time."
On the domestic front, Poloz said the most important made-in-Canada risk is household debt and Canadians' ability to manage higher interest rates. He also acknowledged the Bank of Canada is still analyzing the impact of how weak oil prices will "percolate" through the economy.
"It affects the whole economy and of course I feel sorry for those in Alberta," he said while also giving a nod to the challenges that the energy sector in Saskatchewan and Newfoundland face.
"The adjustments are profound and I don't want to minimize. The adjustments for individuals are very large. But I'm heartened by the way the economy is able to find opportunities for others."