Ottawa, Jan 19 (IANS) The Eurozone debt crisis will curb Canada’s economic growth by 0.6 percent this year, or $9.89 billion, but it’s a smaller damage compared to the expected 1 percent loss in the world’s GDP caused by the turmoil, the Bank of Canada said.

“Deteriorating economic conditions in Europe have a relatively modest impact on the foreign activity measure, given Canada’s limited direct trade links with Europe, and will affect Canadian exports primarily through their spillover effects on US private domestic demand,” the central bank said in its quarterly Monetary Policy Report Wednesday.

However, the bank added that the crisis in Europe is expected to have an indirect impact on the Canadian economy through its implications for financial conditions, confidence and global commodity prices, reported Xinhua.

“A modest recovery is expected to begin in the euro area in late 2012 as financing conditions begin to improve and confidence gradually recovers in response to the implementation of required policy measures and structural reforms,” it said.

The bank made its prediction based on the assumption that the European crisis will be contained by the measures taken by the European Central Bank, Germany and France.

The bank predicted that Canadian economy grew by 2.4 percent in 2011, higher than the its previous forecast of 2.1 percent. Then the economy will subdue somewhat to 2 percent this year and will regain some momentum to reach 2.8 percent in 2013.

Aside from the Eurozone crisis, the bank said the country’s economy is threatened by domestic factors such as consumer debt and the volatility of the real estate market, which led some economists and business analysts to believe Canada is in a “housing bubble” spurred by historic low mortgage interest rates and speculation.

“High household debt levels in Canada could lead to a sharper-than-expected deceleration in household spending,” it said.

It warned that “if there were a sudden weakening in the Canadian housing sector, it could have sizable spillover effects on other areas of the economy”.

The central bank boosted its 2012 forecast for the United States to 2 percent from 1.7 percent, assuming the US Congress’s recent two-month extension of payroll tax cuts and unemployment benefits will be extended through the end of 2012.