TORONTO Feb 24 (Reuters) - Canada's housing market is at risk of a meaningful correction, Nouriel Roubini said on Monday, though the economist known as "Dr. Doom" for his often gloomy forecasts said he was not predicting a crash.
Roubini also said the value of the Canadian dollar is too strong, noting the challenge that poses to the manufacturing sector, and suggested the Bank of Canada should use more aggressive monetary policy to weaken the loonie.
Roubini, who is credited with predicting the collapse of the housing market in the United States and the ensuing financial crisis, pointed to a number of housing markets that are showing signs of "frothiness, if not an outright bubble," including Canada, the United Kingdom and parts of China.
While he highlighted the high level of household debt as an area of concern in Canada, he acknowledged there are many differences between Canada's housing market and the one that collapsed south of the border, including the excessive use of subprime mortgages in the United States and stronger banks in Canada.
"I'm not predicting a crash, but certainly a meaningful correction could occur and that would be something that could of course dampen the economy that is already growing moderately," said Roubini, chairman of Roubini Global Economics and an economics professor at New York University's Stern School of Business.
The Bank of Canada faces the same dilemma as other central banks around the world, which is that policymakers are wary of raising interest rates too soon before economic growth has set in, Roubini said. However, low rates and extraordinarily accommodative monetary policies may eventually lead to asset bubbles, he said in a speech to a Toronto business group.
Roubini said that the Canadian economy overall was doing "OK, not exceptional" and forecast growth of around 2.3 percent to 2.4 percent this year, with a slightly higher pace next year.
"I would say if your currency was 10 percent weaker, that would help manufacturing," said Roubini.
To achieve that, he suggested the Bank of Canada could commit to keep rates low for longer or adopt an easing bias.
"It might not be conventional wisdom, but at the margin, I would say, keeping your currency weaker right now, it's important."
Canada's central bank has a mandate to target the inflation rate and officials have said it is up to the market to set the currency's level.
But the Canadian dollar has weakened since the Bank of Canada took a more dovish shift in policy, leaving the door open to a cut in interest rates.