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Amid a range of downside risks, Canadian policymakers should continue to focus on shoring up financial stability, says the International Monetary Fund (IMF) in its latest report on Canada.

The IMF’s new executive board report noted that real GDP growth is expected to slow to 1.5% in 2019, before picking up again in 2020.

Looking further out, the report saw potential growth of just 1.7% due to weak productivity, Canada’s aging population and poor external competitiveness.

The report also indicated that downside risks remain, including external risks such as ongoing trade tensions, tightening global financial conditions and a global economic slowdown. Domestic threats include a housing market crash, a spike in unemployment and a drop in consumption.

“Against this backdrop, Canada should persevere with policies that preserve financial stability and focus efforts on supporting long-term growth,” the report said.

So far, policy efforts to curb risks in the housing market and address concerns with high household debt levels have helped reduce financial sector vulnerabilities, it noted.

Looking ahead, it will be important to “rebuild policy buffers, preserve financial stability, and boost productivity and competitiveness,” the IMF added.

In terms of financial stability, the report said the existing systemic risk oversight arrangements should be modernized to address gaps that could emerge as oversight responsibilities are spread over multiple levels of government and across the various parts of the financial industry.

“While progress has been made since the 2008 global financial crisis to enhance financial surveillance and regulatory cooperation, important gaps remain in the current architecture,” it said, adding that “the financial sector has been evolving rapidly in recent years in terms of new exposures and instruments, and complex interconnectedness.”

Among other things, it said that “Canada-wide crisis preparedness should be further strengthened” by measures including system-wide contingency planning and stress testing.