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Canada's international investment position, second quarter 2019

Released: 2019-09-12

Canada's net international investment position

$689.7 billion

Second quarter 2019

Canada's net foreign asset position decreased by $10.7 billion in the second quarter to $689.7 billion, as the growth in international liabilities exceeded that of international assets. The decline mostly reflected net changes in positions coming from revaluations.

Chart 1  Chart 1: Canada's net international investment position
Canada's net international investment position

Canada's net foreign asset position represented 30% of its gross domestic product at the end of the second quarter, down from 31% in the first quarter. This proportion has increased considerably since 2014 when Canada became a net lender to the rest of the world.

Chart 2  Chart 2: Net international investment position as a percentage of gross domestic product
Net international investment position as a percentage of gross domestic product

Canada's international assets and liabilities increase

Canada's international assets increased by $72.1 billion to reach $5,419.1 billion at the end of the second quarter. At the same time, Canada's international liabilities were up $82.8 billion to $4,729.4 billion. These increases were both attributable to significant cross-border investments as well as higher stock prices. The downward revaluation due to the appreciation of the Canadian dollar moderated the increase in both assets (-$104.8 billion) and liabilities (-$35.9 billion). At the end of the second quarter, 96% of Canada's international assets and 40% of Canada's international liabilities were denominated in foreign currencies.

Canada's gross external debt, the value of international liabilities in the form of debt instruments, increased by $60.3 billion over the second quarter to $2,736.2 billion. The increase was mainly in the banking sector (+$49.2 billion), while the debt of the general government sector edged up. The banking sector accounted for 40% of Canada's total gross external debt at the end of the second quarter compared with 17% for the general government sector.

Over the quarter, the Canadian dollar gained 2.1% against the US dollar, 0.8% against the euro and 4.8% against the UK pound sterling, but it lost 0.7% against the Japanese yen. Meanwhile, the Canadian stock market gained 1.7%, and the US (+3.8%) and the European stock (+3.6%) markets were up.

Chart 3  Chart 3: Contributors to the change in the net international investment position
Contributors to the change in the net international investment position

Canada's exposure to UK securities declines

On a geographical basis, Canada's net asset position with the United States increased slightly in the second quarter to $177.5 billion. Meanwhile, Canada's net asset position with countries other than the United States declined by $11.5 billion to $512.3 billion.

Although Canada is a net lender to the rest of the world, it is a net borrower with some major partner countries, such as the United Kingdom. Canada posted a net foreign liability position with the United Kingdom of $47.0 billion at the end of the second quarter, mainly in the form of securities.

Canadian assets in UK securities have grown by less than those in other major foreign markets in recent years. Canadian holdings of UK securities declined by $3.1 billion to $125.5 billion and represented 5.3% of total Canadian assets in the form of foreign securities at the end of the second quarter. This proportion has steadily declined in recent years, down from a level of 8.0% in 2014.

Exposure can also be viewed from a currency perspective. After the US dollar and the euro, the UK pound sterling is the third most important foreign currency in Canada's international balance sheet. At the end of the second quarter, 6.4% ($348.9 billion) of Canada's international assets were denominated in UK pound sterling compared with 1.3% ($60.5 billion) of its international liabilities.

Canada's relationship with the United Kingdom goes beyond the framework of this release. For more information on the economic and financial nature of this relationship, visit Canada and the World Statistics Hub.

Chart 4  Chart 4: Total international assets and liabilities, by currency
Total international assets and liabilities, by currency



  Note to readers

Currency valuation

The value of assets and liabilities denominated in foreign currency is converted to Canadian dollars at the end of each period for which a balance sheet is calculated. When the Canadian dollar is appreciating in value, the restatement of the value of these assets and liabilities in Canadian dollars lowers the recorded value. The opposite is true when the Canadian dollar is depreciating.

Definitions

The international investment position presents the value and composition of Canada's assets and liabilities to the rest of the world.

Canada's 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 referred to as Canada's net foreign debt. An excess of international assets over international liabilities can be referred to as Canada's net foreign assets.

Foreign direct investment is presented on an asset-liability principle basis (that is, gross basis) in the international investment position. Foreign direct investment can also be presented on a directional principle basis (that is, net basis), as shown in supplementary foreign direct investment tables 36-10-0008-01 and 36-10-0009-01. 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, and (2) is classified as a liability and included in direct investment liability.

Products

The article "Currency composition of Canada's international investment position," part of Latest Developments in the Canadian Economic Accounts (Catalogue number13-605-X), is 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.

The 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.

Contact information

For more information, contact us (toll-free 1-800-263-1136; 514-283-8300; STATCAN.infostats-infostats.STATCAN@canada.ca).

To enquire about the concepts, methods or data quality of this release, contact Vicky Gélinas (613-716-2828; vicky.gelinas@canada.ca), International Accounts and Trade Division.

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