One prominent economist is dismissing fears about the growing number of Canadians who are on the brink of bankruptcy, despite consumer insolvency rates rising at the fastest pace in almost three years.
“It’s nothing to write home about,” CIBC Deputy Chief Economist Benjamin Tal told BNN Bloomberg in an interview Friday.
Tal said higher insolvency rates make sense considering interest rates are starting to rise.
“We are starting from an extremely low base,” he added, pointing out consumer bankruptcy rates have been falling overall in recent years.
Tal acknowledged regional anomalies, like Alberta, where insolvencies rates were the highest of any province in the latter part of 2018, according to recent data from the Office of the Superintendent of Bankruptcy.
“Alberta is definitely a different cycle because Alberta is riding the wave of oil prices and the situation there is not so great,” he said.
Tal added that while he’s concerned about some western provinces, including Manitoba and Saskatchewan, what’s happening in those regions doesn’t reflect the country as a whole right now.
Tal’s comments come on the heels of a recent survey conducted for MNP Ltd. that showed 46 per cent of Canadians are within $200 of not being able to pay their monthly bills.
The Bank of Canada left its key interest rate unchanged at 1.75 per cent at its most recent meeting on Jan. 9, after raising rates three times in 2018, but said rates "need to rise over time."
“The Bank of Canada is telling you: maybe the disease is also the cure,” Tal said. “Maybe the increased sensivity to higher rates will prevent rising rates from rising to the sky.”
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