economies has been dampened in the wake of the financial crisis. since the recession, emerging - market economies have accounted for two - thirds of global economic growth – up from just one - third at the turn of the millennium. emerging market economies also account for one - half of the growth in global imports. compare this with the united states where the economy is now well below its pre - crisis path and is likely to remain so even once the economy recovers its cyclical losses2 ( chart 4 ). clearly, exporters need to refocus their efforts to the fast - growing economies. m. carney, “ exporting in a post - crisis world ” ( speech to the greater kitchener - waterloo chamber of commerce, waterloo, ontario, 2 april 2012 ). bis central bankers ’ speeches current outlook : where we are today the global economy continues to face significant challenges. in the major advanced economies, especially the united states and europe, deleveraging by households and financial institutions and fiscal consolidation continue to weigh on growth. in the united states, the protracted dislocation of the housing market has been a drag on the recovery, despite some recent improvement. the debt crisis in the euro area, which intensified late last year, triggered a recession there and has had negative spillovers to many other countries, including the united states. in emerging market economies such as china, growth is moderating from the rapid pace of recent years, as exports to europe have fallen off and domestic demand has also cooled. however, economic growth is expected to gain momentum over 2013 – 14, as exports to advanced economies recover. despite these challenges, the profile for global economic growth has improved since the beginning of this year. 3 in particular, economic conditions in the united states have improved, with employment gains and better consumer and business confidence. the euro area, however, is still in recession, and is projected to show only a modest recovery later this year, although the risks around this projection are high. overall, global economic growth is now projected to moderate in 2012 to 3. 2 per cent and to recover to 3. 4 per cent in 2013 and 3. 8 per cent in 2014. here in canada, economic momentum is slightly firmer than a few months ago. since canada ’ s economic growth has also turned out stronger than expected in recent quarters, we estimate that there is now less slack in the canadian economy than previously anticipated ( chart 5 ). the discussion in this section is based on the bank of

, at variable rates with amortization periods of more than 25 years. and our models suggest that the most highly indebted households saw only a small increase in their liquid assets in that time. this brings me to our second, and related, vulnerability — elevated house prices. strong demand for more living space, low interest rates, inadequate supply, increased investor activity and expectations of future price increases all made for a hot market during the pandemic. house prices rose about 50 %, on average, since the beginning of the pandemic. as canadians return to more normal activities and interest rates rise, we expect to see some moderation in the housing market. indeed, this has started. recent data indicate a marked decline in the level of resale activity from its peak. and even if house prices are up sharply on a year - over - year basis, some markets have recently seen declines. with inflation well above the 2 % target and the canadian economy overheating, the bank ’ s number one priority is to get inflation back to target, and we are raising interest rates to make that happen. labour markets are very strong, and household balance sheets have improved overall. the economy can handle — indeed needs — higher interest rates. and given the unsustainable strength of housing activity, moderation in housing would be healthy. but high household debt and elevated house prices are vulnerabilities. if the economy slowed sharply and unemployment rose considerably, the combination of more highly indebted canadians and high house prices could amplify the downturn. if those in highly indebted households lose their jobs, they would likely need to reduce their spending sharply to continue servicing their mortgage. in addition, a big correction in house prices would reduce both household wealth and access to credit, particularly among the most - indebted households. were this to affect many households, it could have broad implications for the economy and financial system. this is not what we expect to happen. our goal is for a soft economic landing with inflation coming back to the 2 % target. but it is a vulnerability to watch closely and manage carefully. let me now turn to carolyn to address three global vulnerabilities outlined in the fsr. thank you, governor. the final set of vulnerabilities described in our fsr has been highlighted by the war in ukraine and other geopolitical tensions, and some risks are rising. events over the past year have emphasized the interconnected nature of the