The International Monetary Fund is warning Canadian economic growth is at risk due to housing market imbalances, declining productivity and trade uncertainty stemming from the Donald Trump administration. In a report published Wednesday, the IMF said the deck is stacked against Canada in terms of sustaining recent growth trends.

“As the fiscal stimulus fades and the U.S. economy returns to trend, low labour productivity growth and population aging will limit potential growth to about 1.8 per cent, lower than the historical average of 2.6 per cent,” the IMF wrote.

The IMF warned of significant risks to its outlook if the housing leg of the Canadian economy is kicked out from under it.

“A sharp correction in the domestic housing market could impair bank balance sheets, trigger negative feedback loops in the economy and lead to contingent claims on the government,” the IMF added. “Financial stability risks could emerge if the housing market correction is accompanied by a severe recession.”

Canada’s finance minister, though, didn’t think there was anything new to consider in the IMF’s warning.

“What the IMF has said is what we know, is that there’s a level of household indebtedness in Canada that is significant,” Bill Morneau told reporters outside the House of Commons on Wednesday afternoon. “It’s something for us to watch. The housing market of course is something that we’re paying close attention to, so this was entirely expected.” 

He maintained his stance that the Canadian economy is on track, adding that he believes the government is doing its part to protect potential homebuyers.

“We are vigilant in looking at the market on a very regular basis to ensure we protect Canadians. We do believe that our economy is showing really strong signs of growth. The Stats Canada report today was positive and we believe that’s a result of our policies.” 

Earlier Wednesday, Morneau took to Twitter, proclaiming “Our plan is working. Economic growth for the first quarter of 2017 is strong.”

Concerns surrounding the domestic housing market have grown over the course of the last year, as fears of contagion from the crisis at Home Capital Group (HCG.TO) paired with the meteoric rise in home prices in Vancouver and Toronto sow doubt about the stability of what has become the main driver of economic growth. Moody’s downgraded a slate of Canadian banks earlier in May due to a deteriorating outlook.

As a result of high home prices and the accompanying rise in household debt, the IMF noted Finance Minister Bill Morneau should be the first line of defense if a shock reverberates through the economy, rather than relying on the Bank of Canada’s ability to cut rates to stimulate growth.

“The government should have on stand-by fiscal measures that could be easily brought forward,” the IMF wrote. “While further easing of monetary policy could be a useful complement, there is a risk that such action could exacerbate household balance sheet vulnerabilities and housing imbalances.”

The international agency also recommended British Columbia and Ontario scrap their respective taxes on foreign homebuyers in favour of a new lever to curb speculation without explicitly targeting foreign nationals.

“The authorities are encouraged to replace the tax with alternative measures that are effective to address systemic financial risk,” according to the IMF. “This could include a combination of prudential and tax-based measures that discourage speculative activity without discriminating between residents and non-residents.”