Canada's balance of international payments

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Fourth quarter 2011 (Previous release)

Canada's current account deficit (on a seasonally adjusted basis) narrowed by $2.0 billion in the fourth quarter to $10.3 billion, largely the result of an increase in the export of goods. For 2011, the current account deficit declined to $48.3 billion following a record high of $50.9 billion in the previous year.

Current account balances

Current account balances

Chart description: Current account balances

In the capital and financial account (unadjusted for seasonal variation), foreign investment in Canadian government debt securities was the main supply of funds to the Canadian economy. Foreign investment in Canadian securities was $95.6 billion in 2011.

Note to readers

The balance of international payments covers all economic transactions between Canadian residents and non-residents in two accounts, the current account and the capital and financial account.

The current account covers transactions in goods, services, investment income and current transfers.

The capital and financial account is mainly composed of transactions in financial assets and liabilities.

In principle, a current account surplus/deficit corresponds to an equivalent net outflow/inflow in the capital and financial account. In practice, as international transactions data are compiled from multiple sources, this is rarely the case and gives rise to measurement error. The statistical discrepancy is the unobserved net inflow or outflow.

For more information about the balance of payments, consult the "Frequently asked questions" section in the National economic accounts module of our website. The module also presents the most recent balance of payments statistics.

Current account

Largest trade in goods surplus since third quarter of 2008

The surplus on trade in goods increased to $3.1 billion in the fourth quarter of 2011. This was the largest surplus since the third quarter of 2008, and was the result of stronger exports of energy products and automotive products. Exports to the United States rose by $5.9 billion leading to a $4.0 billion increase in the goods surplus with that country.

Goods balances by geographic area

Goods balances by geographic area

Chart description: Goods balances by geographic area

For the year as a whole, the trade balance shifted to a $1.4 billion surplus after two back-to-back years of deficit.

Total exports of goods were up $6.7 billion in the fourth quarter to $121.5 billion, the highest level since the third quarter of 2008. The $4.1 billion increase in exports of energy products reflected a rise in crude petroleum exports, mostly on higher prices. Exports of automotive products were up $1.9 billion, with all the gains from higher volumes of automobiles. Exports of agricultural and fishing products advanced for a third straight quarter, on higher prices.

Imports of goods increased $3.8 billion to $118.3 billion. Energy products were up $1.8 billion mostly on higher volumes of crude petroleum. Imports of machinery and equipment rose by $1.3 billion, mainly because of higher prices.

Deficit on trade in services edges up

The services deficit edged up $0.1 billion to $6.2 billion in the fourth quarter. This increase was led by a lower commercial services surplus and a higher transportation deficit, largely accounted for by lower receipts on both accounts. This result was partially offset by a reduction in the travel deficit of $0.2 billion as Canadians lowered their payments on travel abroad, especially to the United States.

On an annual basis, the services deficit of $24.6 billion for 2011 arose mainly from increased deficits on travel and transportation accounts.

Investment income deficit increases on higher payments

The deficit in cross-border investment income flows was up $0.6 billion to $6.0 billion, as payments outpaced receipts in the fourth quarter. Profits earned by foreign direct investors in Canada increased $1.1 billion to $11.4 billion—the highest level since the second quarter of 2008. This largely reflected increased un-remitted earnings of Canadian affiliates. On the other hand, profits earned abroad by Canadian direct investors edged down in the quarter.

Annually, the investment income deficit increased $4.6 billion in 2011, mainly on the growth of profits from foreign direct investment in Canada relative to those of Canadian direct investment abroad. Payments on portfolio investment rose 7% in 2011, which reflected higher non-resident holdings of Canadian securities and led to a fourth consecutive increase of the portfolio investment income deficit.

Capital and financial account

Foreign investors acquire Canadian securities for a 12th straight quarter

Non-residents continued to increase their holdings of Canadian securities with a $26.1 billion investment in the fourth quarter. This level of activity was in line with the average quarterly investment observed since the first quarter of 2009. Over 80% of the purchases in the quarter were in the Canadian debt market, largely in government instruments.

Foreign portfolio investment in Canadian debt securities

Foreign portfolio investment in Canadian debt securities

Chart description: Foreign portfolio investment in Canadian debt securities

Foreign acquisition of Canadian bonds was $11.4 billion, led by purchases of federal and provincial bonds on the secondary market. This activity was moderated by net retirements of provincial and private corporate bonds. Foreign investment in Canadian bonds was $42.9 billion in 2011 and was less than half the inflow of the previous year, as the pace of investment in both government and corporate bonds slowed compared with 2009 and 2010.

Non-resident investment in the Canadian money market slowed to $9.8 billion in the fourth quarter from $16.2 billion in the third quarter. Transactions were led by acquisitions of federal Treasury bills. Foreign purchases of Canadian short-term instruments increased in the second half of the year to a high of $32.0 billion in 2011. The differential between long- and short-term interest rates in Canada narrowed progressively over the year to be, by the end of December, at their lowest level since August 2008.

Foreign investment in Canadian equities was $5.0 billion in the fourth quarter. Most of the activity took place in the last two months of the year as Canadian stock prices declined. Canadian equity prices were down 11% over the course of the year. Non-resident investors added $20.7 billion of Canadian portfolio shares to their holdings in 2011, largely through secondary market transactions.

Canadians invest in foreign bonds for the first time in 2011

Canadians acquired $7.8 billion in foreign securities in the fourth quarter, the largest quarterly outflow of the year. Investment was focused in foreign bonds and stocks, as holdings of foreign money market instruments were further reduced over the quarter.

Canadian portfolio investment abroad1

Canadian portfolio investment abroad

Chart description: Canadian portfolio investment abroad

Canadian investment of $5.0 billion in foreign bonds in the quarter was the largest since the second quarter of 2007 and was primarily composed of US government and corporate issues. This outflow was moderated by a $1.2 billion Canadian divestment in foreign money market instruments, mainly US paper. Despite increased investment in the fourth quarter, Canadians reduced foreign bonds from their portfolios for a fourth straight year in 2011.

Canadian investment in foreign stocks slowed again, but remained relatively strong at $4.0 billion. For the first time in 2011, acquisitions by investors were primarily targeted at non-US foreign shares. US stock prices were up 11% in the quarter while other major foreign stock markets also increased, but at a slower pace. For the year, foreign equity purchases were $25.5 billion, almost double that of 2010.

Inward and outward direct investment slow

Foreign direct investment in Canada slowed to $3.4 billion in the fourth quarter. Inflows in the quarter were led by European direct investors, mainly from merger and acquisition transactions. This activity was partially offset by a rare repatriation of funds from the Canadian economy by US direct investors. Foreign direct investment in Canada increased to $40.3 billion in 2011, with most of the activity concentrated in the first half of the year.

Canadian direct investment abroad declined to $13.1 billion in the fourth quarter from $17.1 billion in the previous quarter. These outflows originated primarily from the finance and from the energy and metallic mineral sectors. Investment for the year was up by $5.5 billion to $45.2 billion, despite the lowest level of cross-border mergers and acquisitions in five years. Outward direct investment was led by the finance sector in 2011.

Available without charge in CANSIM: tables 376-0001 to 376-0017 and 376-0035.

Definitions, data sources and methods: survey numbers, including related surveys, 1534, 1535, 1536 and 1537.

The fourth quarter 2011 issue of Canada's Balance of International Payments (67-001-X, free) will soon be available.

The balance of international payments data for the first quarter of 2012 will be released on May 31.

For more information, or to order data, contact Client Services (613-951-1855; To enquire about the concepts, methods or data quality of this release, contact Denis Caron (613-951-1861;, Balance of Payments Division.