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Canada's balance of international payments, second quarter 2019

Released: 2019-08-29

Current account balance

-$6.4 billion

Second quarter 2019

Canada's current account deficit (on a seasonally adjusted basis) narrowed by $10.2 billion to $6.4 billion in the second quarter, the lowest level since Canada returned to a deficit position at the end of 2008. The reduction mainly reflected a much lower deficit on goods.

The deficit on trade in goods and services narrowed by $9.3 billion to $5.5 billion in the second quarter. Exports were up by $8.0 billion, led by higher sales of energy products. Imports were down by $1.3 billion, largely on lower imports of aircraft and other transportation equipment and parts.

The current account is the broadest measure of Canada's trade activity with the rest of the world. Since 2009, Canada has recorded a current account deficit every year with services posting the largest cumulated deficit, followed by investment income and goods.

Inflows of funds from abroad to finance the current account deficit mainly came from transactions in currency and deposits in the second quarter. These transactions generated a net inflow of $27.9 billion, as non-residents considerably increased their holdings of currency and deposits in Canada.

Meanwhile, portfolio and direct investment activity both generated a net outflow of funds from the economy. In the portfolio investment category, higher Canadian investment in foreign securities, combined with the largest foreign divestment in Canadian securities since the end of 2007, contributed to a net outflow of funds totalling $17.0 billion.

Direct investment in Canada accelerated on higher mergers and acquisitions activity in the second quarter. Nevertheless, direct investment abroad exceeded direct investment in Canada by $4.3 billion.

Chart 1  Chart 1: Current account balances
Current account balances

Current account

The goods deficit narrows significantly

The trade in goods deficit narrowed by $8.6 billion to $0.3 billion in the second quarter, the lowest deficit since the end of 2016. Overall, exports were up in the quarter, while imports declined.

Exports of goods increased by $7.6 billion, to $154.1 billion. Energy products accounted for the largest share of this increase, up $3.4 billion on higher prices and volumes of crude petroleum. Exports of motor vehicles and parts as well as farm, fishing and intermediate food products also contributed to the increase, largely on higher volumes.

Imports of goods declined by $1.0 billion, following a $3.5 billion increase in the first quarter. Imports of aircraft and other transportation equipment and parts were down $1.9 billion, almost completely offsetting the gain in the first quarter. Moderating this decline were increases in a number of products, including motor vehicles and parts and energy products.

Highest goods surplus with the United States in over 10 years

On a country basis, the goods surplus with the United States reached $15.9 billion, the highest in over 10 years. The goods deficit with non-US countries narrowed by $2.9 billion, mainly on lower deficits with China, the Netherlands and Belgium.

The United States accounted for nearly 75% of Canada's total exports of goods in the second quarter, a share that has remained relatively stable in the last decade, after reaching a high of 84% at the end of 2000.

Chart 2  Chart 2: Goods balances by geographic area
Goods balances by geographic area

Investment income and services contribute to a lower current account deficit

In the second quarter, Canada's investment income balance posted a first-ever surplus on the growth of profits earned by Canadian direct investors on their assets abroad. These profits have been trending upward in recent quarters. Overall, income earned on international financial assets exceeded income paid on international liabilities by $0.2 billion in the second quarter.

Exports of services were up by $0.4 billion in the second quarter, while imports declined by $0.3 billion. As a result, the services deficit narrowed by $0.7 billion to $5.2 billion, the lowest level since the end of 2011. By category of services, travel, transportation and commercial services all contributed to the lower deficit in the quarter.

Financial account

Foreign holdings of Canadian securities decline

Foreign investors reduced their holdings of Canadian securities by $6.5 billion in the second quarter, compared with a $39.0 billion investment in the first quarter. Non-residents invested in Canadian debt securities, but reduced their holdings of equities. This was the highest divestment in Canadian securities since the fourth quarter of 2007.

The reduction in foreign holdings of Canadian equities totalled $14.3 billion, almost offsetting the $15.0 billion investment in the previous quarter. The decline was mainly related to cross-border mergers and acquisitions activity in Canada. Sales on the secondary market also contributed to the decline. On a sector basis, the reduction was largely in energy and mining shares.

Foreign investment in Canadian bonds was $7.4 billion, led by new issues abroad of private corporate bonds denominated in US dollars. Meanwhile, foreign holdings of Canadian government bonds were down, the fifth decrease in the last six quarters.

On the other side of the ledger, Canadian investors resumed their acquisitions of foreign securities by adding $10.6 billion worth to their portfolio in the second quarter. This followed a $2.2 billion divestment in the first quarter. Investors continued to invest in foreign bonds, mainly US corporate bonds.

Chart 3  Chart 3: Foreign investment in Canadian securities
Foreign investment in Canadian securities

Direct investment in Canada increases

Direct investment in Canada increased to $21.7 billion in the second quarter, up from $12.0 billion in the first quarter. This was the highest investment since the third quarter of 2015. Foreign mergers and acquisitions activity in Canada were the main contributor to this increase. On a sector basis, direct investors targeted mainly the energy and mining industry.

Direct investment abroad totalled $25.9 billion in the second quarter. More than half of this activity was in the finance and insurance industry. Mergers and acquisitions activity totalled $9.7 billion, down from $16.9 billion in the first quarter. Overall, direct investment abroad was primarily directed to the United States and, to a lesser extent, the United Kingdom.

Chart 4  Chart 4: Foreign direct investment
Foreign direct investment

  Note to readers


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

The current account covers transactions in goods, services, compensation of employees, investment income and secondary income (current transfers).

The current account data in this release are seasonally adjusted. For information on seasonal adjustment, see Seasonally adjusted data – Frequently asked questions.

The capital account covers capital transfers and transactions in non-produced, non-financial assets.

The financial account covers transactions in financial assets and liabilities.

In principle, a net lending (+) / net borrowing (-) derived from the sum of the current and capital accounts corresponds to a net lending (+) / net borrowing (-) derived from the financial account. In practice, as data are compiled from multiple sources, this is rarely the case and gives rise to measurement error. The discrepancy (net errors and omissions) is the unobserved net inflow or outflow.

Foreign direct investment is presented on an asset-liability principle basis (that is, gross basis) in the financial account. Foreign direct investment can also be presented on a directional principle basis (that is, net basis), as shown in supplementary foreign direct investment tables 36-10-0025-01, 36-10-0026-01, and 36-10-0473-01. The difference between the two foreign direct investment conceptual presentations resides in the classification of reverse investment such as (1) Canadian affiliates' claims on foreign parents and (2) Canadian parents' liabilities to foreign affiliates. Under the asset/liability presentation, (1) is classified as an asset and included in direct investment assets, also referred to as direct investment abroad in this text, and (2) is classified as a liability and included in direct investment liability, also referred to as direct investment in Canada in this text.

For more information on the balance of payments, consult chapter 8, "International accounts," in the User Guide: Canadian System of Macroeconomic Accounts, available on our website. The chapter also presents the most recent balance of payments statistics.

Real-time table

Real-time table 36-10-0042-01 will be updated on September 9. For more information, see Real-time tables.

Next release

Balance of international payments data for the third quarter will be released on November 28.


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

The document, "A preview of the 2019 revision of the Canadian System of Macroeconomic Accounts," which is part of Latest Developments in the Canadian Economic Accounts (Catalogue number13-605-X), is now available.

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

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

Contact information

For more information, contact us (toll-free 1-800-263-1136; 514-283-8300;

To enquire about the concepts, methods or data quality of this release, contact Éric Simard (613-219-5932;, International Accounts and Trade Division.

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