While Canada’s economy has remained relatively strong over the past year, some economists are worried about its competitiveness on the global stage.

“We have long fretted about Canadian competitiveness due to a raft of policy decisions made over the past several years in both Canada and the U.S. that have opened up a large competitiveness wedge to Canada’s disadvantage,” writes RBC global asset management chief economist Eric Lascelles, in a recent note.

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According to Lascelles, while there are several factors to worry about when it comes to the country’s international standing, its potentially volatile housing market is front of mind.

“Canada’s competitiveness shortfall is still significant and housing risks present another challenge,” he writes. “As such, we…remain fundamentally cautious.”

This isn’t the first time Lascelles has questioned the housing market’s effect on Canada’s global competitiveness. Earlier this year, he noted that a housing slowdown could wreak havoc on the country’s economy.

“The potential headwind is the possibility of a more intense Canadian housing slowdown,” he wrote. “The risk would seem to be elevated given the rapid rise of household debt in Canada in recent years and poor affordability.”

Lascelles noted that the introduction of a foreign-buyer tax in the GTA, a new mortgage stress test and a rising interest rate environment have taken some of the air out of the once hot market. While that’s good for the country’s financial security, it’s not great news for its economy, at least in the short term.

“Attempting to predict the exact outcome [of where the housing market is headed] is folly,” he wrote. “But at a minimum it seems unlikely that housing will be able to continue driving growth artificially higher over the next decade in the way that it did over the past 10 years.”

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