The Daily — Canada’s international investment position, first quarter 2022

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Released: 2022-06-10

Canada’s net international investment position

$1,150.0 billion

First quarter 2022

Canada’s net foreign asset position, the difference between Canada’s international financial assets and international liabilities, decreased by $352.6 billion to $1,150.0 billion at the end of the first quarter of 2022, its lowest level since the end of the third quarter of 2020.

The revaluation effect from changes in market prices (-$248.1 billion) contributed the most to the decline in Canada’s net foreign asset position. Global equity markets moved in different directions in the first quarter. While the Canadian stock market rose 3.1%, the US and European stock markets fell 4.9% and 9.2%, respectively. Canada’s international investment position is highly exposed to stock market performance. At the end of the first quarter, 72.5% of Canada’s international assets and 48.2% of its liabilities were held in equities.

The decline in the net international position was the first since the first quarter of 2020, when global stock markets fell sharply at the start of COVID-19 pandemic.

Chart 1


Canada’s net international investment position


Chart 1: Canada's net international investment position

The revaluation effect resulting from exchange rate fluctuations (-$74.3 billion) further reduced Canada’s net foreign asset position. During the first quarter, the Canadian dollar appreciated 1.5% against the US dollar, 3.9% against the euro and 6.9% against the Japanese yen. At the end of the quarter, 96.8% of Canada’s international assets were denominated in foreign currencies, compared to 34.9% of its international liabilities.

On a geographic basis, Canada’s net foreign asset position with the United States decreased by $139.6 billion to $833.8 billion at the end of the first quarter, and decreased by $213.0 billion to settle at $316.2 billion with the rest of the world.

Chart 2


Contributors to the change in the net international investment position


Chart 2: Contributors to the change in the net external balance

Canada’s international assets down sharply

Canada’s international assets fell by $393.1 billion to $7,350.6 billion at the end of the first quarter, nearly reversing the strong growth of the previous quarter. Downward revaluation due to changes in market prices (-$217.3 billion) led the decline, followed by revaluation resulting from exchange rate fluctuations (-$110.6 billion). Strong sales of foreign equity securities by Canadian investors also contributed to the decline. At the end of the quarter, 70.7% of Canada’s international assets were held by the financial sector.

On the other side of the ledger, Canada’s international liabilities decreased by $40.5 billion to $6,200.6 billion. Financial transactions (-$45.4 billion) such as the withdrawal of currency and deposits in Canada by non-residents as well as the downward revaluation resulting from the fluctuations of the Canadian dollar against foreign currencies (-36, $3 billion) contributed to the overall reduction. Revaluations due to changes in market prices (+$30.8 billion), driven by higher Canadian stock prices, moderated the decline. At the end of the quarter, the international liabilities of financial corporations represented 44.7% of Canada’s total international liabilities, compared to 40.3% for non-financial corporations.

The financial sector was by far the largest contributor to Canada’s net asset position with the rest of the world at the end of the first quarter, with its international assets exceeding its international liabilities by $2,425.7 billion. By contrast, non-financial corporations and the general government sector both posted a net external debtor position.

Chart 3


Canada’s international assets and liabilities


Chart 3: Canada's international assets and liabilities

Canada’s gross external debt is falling

Canada’s gross external debt, or the value of Canadian debt securities held by foreign investors, fell $174.5 billion to $3,213.4 billion in the first quarter in market value terms , the first drop in a year. It accounted for 119.1% of Canada’s gross domestic product, down from 130.2% in the previous quarter and the lowest level since the first quarter of 2019. The financial sector, largely depository corporations, was the main contributor to the decline (-$111.5 billion), followed by the public sector (-$40.8 billion). At the end of March, the financial sector continued to contribute the largest proportion of Canada’s gross external debt (56.6%), followed by the government sector (20.1%).

Chart 4


Canada’s gross foreign debt as a percentage of gross domestic product


Chart 4: Canada's gross external debt as a percentage of gross domestic product









Notice to readers

Definitions

The global external position is the value and composition of Canada’s assets and liabilities to the rest of the world.

from Canada net international investment position is the difference between Canada’s assets and liabilities to the rest of the world. An excess of international liabilities over international assets can be described as net foreign debt. An excess of international assets over international liabilities can be described as net foreign assets.

foreign direct investment is presented on an active-liability basis (i.e. on a gross basis) in the international investment position. Foreign direct investment can also be presented on a directional basis (i.e. on a net basis), as shown in the foreign direct investment supplemental tables 36-10-0008-01, 36-10-0009 -01 and 36-10-0659. -01. The difference between the two conceptual presentations of foreign direct investment lies in the classification of reverse investments as (1) claims of Canadian affiliates on foreign parent companies and (2) debts of Canadian parent companies on affiliates foreign. Based on the presentation of assets and liabilities, (1) is classified as an asset and included in direct investment assets, and (2) is classified as a liability and included in direct investment liabilities.

next release

International investment position data for the second quarter of 2022 will be released on September 9, 2022.


Some products

The Economic Accounts Statistics and International Trade Statistics portals are available on the Topics Statistics Canada website module.

The Canada and the World Statistics Hub (Catalog number13-609-X) is available online. This product illustrates the nature and extent of Canada’s economic and financial relations with the world through interactive charts and tables. This product provides easy access to trade, investment, employment and travel information between Canada and a number of countries including the United States, United Kingdom, Mexico, China and Japan.

The product Canada’s International Trade and Investment Fact Sheet by Country (Catalog number71-607-X) is available online. This product provides easy, centralized access to Canada’s international trade and investment statistics, country by country. It contains annual information for nearly 250 trading partners in summary form, including graphs, tables and a short analysis which can also be exported to PDF.

The Methodological Guide: Canadian System of Macroeconomic Accounts (Catalog number13-607-X) is available.

The User Guide: Canadian System of Macroeconomic Accounts (Catalog number13-606-G) is also available.

Contact information

For more information, or to inquire about the concepts, methods, or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; [email protected]) or Media Relations ([email protected]).

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