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Canada's balance of international payments, second quarter 2020

Released: 2020-08-27

Current account balance

-$8.6 billion

Second quarter 2020

Canada's current account deficit (on a seasonally adjusted basis) narrowed by $4.6 billion in the second quarter to $8.6 billion. The reduction reflected a lower deficit in trade in goods and services and was moderated by a lower surplus for investment income.

In the financial account (unadjusted for seasonal variation), inflows of funds from abroad to finance the current account deficit largely came from record foreign investment in Canadian debt securities.

Borrowing needs from governments increased substantially in the second quarter to support Canadian enterprises and households affected by the COVID-19 pandemic, and foreign creditors contributed strongly to these financing activities.

Chart 1  Chart 1: Current account balances
Current account balances

Current account

Lower goods deficit as imports decline by more than exports

The combined trade in goods and services deficit declined by $5.3 billion to $7.9 billion in the second quarter. Both the goods and services deficits narrowed in the quarter.

The trade in goods deficit was down by $1.0 billion to $7.7 billion. Goods exports decreased by an unprecedented $33.2 billion to $106.9 billion. The largest declines were in motor vehicles and parts, down $11.7 billion on lower volumes, and in energy products, down $10.6 billion as prices fell by about 41%.

Goods imports were down by a record $34.2 billion to $114.5 billion, with motor vehicles and parts accounting for half of this decline as a result of lower volumes. Imports of energy products were down $5.0 billion on lower prices and volumes.

The decrease in both exports and imports occurred mainly during the first two months of the second quarter, with June showing some signs of recovery. Export and import activity recorded in the second quarter were equivalent to levels last seen in 2010 and 2011.

On a geographical basis, the trade surplus with the United States declined $2.0 billion, with both exports and imports down by about 30%. Trade balances with Japan and Mexico showed the largest gains as a result of lower imports of motor vehicles and parts from these two countries.

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

Trade in services deficit down significantly

The trade in services balance recorded a $0.2 billion deficit, down from $4.5 billion in the first quarter. The decline was mainly due to the slower activity in the tourism sector, resulting from the COVID-19 pandemic and related travel restrictions in force for the whole quarter, which significantly reduced the number of cross-border travellers.

The travel services balance went from a $2.3 billion deficit in the first quarter to a $2.0 billion surplus in the second quarter. Both exports and imports posted large decreases. However, exports declined less than imports, as education-related travel services, which have been less affected by the COVID-19 pandemic than other types of travel services, represent a much larger share of overall travel service exports than imports.

The decrease in travel activities also led to lower exports and imports of passenger fares, which were the main factor behind the $1.2 billion reduction in the transport services deficit, with imports more affected than exports.

The balance in commercial services went from a $0.7 billion surplus in the first quarter to a $0.5 billion deficit in the second quarter. Exports of commercial services were down $0.6 billion, while imports were up $0.6 billion, mainly as a result of the large volume of new issues of Canadian bonds on foreign financial markets, which led to higher commissions paid.

In comparison to travel and transportation services, commercial services were less affected by constraints related to the pandemic in the second quarter because a large share of these services are provided remotely, meaning that the supplier and the consumer of the service remain in their respective country.

The investment income surplus decreases

During the second quarter, the primary income surplus was reduced by $0.9 billion to $0.2 billion. Most of this change was the result of a lower investment income surplus.

Canada's investment income surplus decreased $1.1 billion to $0.7 billion, as income receipts declined by more than income payments. Profits earned by Canadian investors on their direct investment abroad fell $4.7 billion, while, on the payments side, profits earned by foreign investors on their direct investment in Canada were down $3.1 billion.

Financial account

Record foreign investment in Canadian debt securities

Foreign investors acquired a record $80.5 billion of Canadian debt securities in the second quarter, following a $39.9 billion investment in the first quarter. This level of foreign investment was almost twice as high as the previous record of $46.3 billion set in the third quarter of 2017.

In the second quarter, the overall borrowing activity from the issuance of debt securities by the federal government led to strong foreign acquisitions on the secondary market, as non-resident investors purchased a total of $46.3 billion of federal government outstanding bonds and money market instruments during the quarter. New issues of Canadian private corporate bonds placed in foreign markets and denominated in foreign currencies also largely contributed to the inflows of funds in the economy. Canadian chartered banks led this activity.

Meanwhile, non-resident investors withdrew $20.6 billion of funds from the Canadian equity market, following a divestment of $12.6 billion in the first quarter. Despite the increase in Canadian stock prices, foreign investors sold shares from all sectors of the Canadian economy.

Chart 3  Chart 3: Foreign portfolio investment
Foreign portfolio investment

Canadian investment in foreign securities resumes

Canadian acquisitions of foreign securities totalled $24.1 billion in the second quarter, the highest investment since the fourth quarter of 2017. This activity followed a record divestment of $45.1 billion in the first quarter.

Canadian investors increased their exposure to US shares by $18.9 billion, after shedding $29.2 billion worth of these instruments in March. On a monthly basis, there were acquisitions in each month of the quarter, with the pace of acquisitions increasing throughout the quarter. US stock prices were up by 20.0% in the second quarter.

Direct investment activity increases

Direct investment abroad increased to $14.8 billion in the second quarter, from $7.6 billion in the first quarter. The bulk of the activity was in the finance and insurance industry. Mergers and acquisitions activity was $3.5 billion, down from a revised $6.6 billion in the first quarter. Overall, direct investment abroad was directed to several countries, led by the United States and Mexico.

Direct investment in Canada totalled $11.8 billion in the second quarter, up slightly from the first quarter. Mergers and acquisitions activity in Canada was the main contributor to the inflows of funds in the quarter.

Overall, direct investment activity generated a net outflow of funds of $2.9 billion from the Canadian economy in the quarter.

Chart 4  Chart 4: Foreign direct investment
Foreign direct investment

  Note to readers

As some data sources were received with delays and response rates to our quarterly surveys are generally lower due to current conditions, higher revisions in the data may be recorded.

Because of the unusually small values in travel services since the beginning of the second quarter of 2020, future revisions to seasonally adjusted data for the months of 2020 can be expected to be larger than usual. With uncertainty about how long the impacts of COVID-19 on world tourism activities will continue, the unadjusted (raw) travel data may provide more useful information for users on the short-term changes in international travel services data.


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 8. For more information, see Real-time tables.

Next release

Balance of international payments data for the third quarter will be released on November 30.


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 Economic accounts statistics portal, accessible from the Subjects module of our website, features an up-to-date portrait of national and provincial economies and their structure.

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 Denis Caron (, International Accounts and Trade Division.

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