Canada's international investment position, third quarter 2020
Archived Content
Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please "contact us" to request a format other than those available.
Released: 2020-12-10
$1,170.1 billion
Third quarter 2020
Canada's net foreign asset position increased by $94.4 billion to $1,170.1 billion at the end of the third quarter. For a second consecutive quarter, the increase was due to higher equity prices and was moderated by the revaluation effect from fluctuations in exchange rates, as well as net borrowings from abroad.
Chart 1
Canada's net international investment position
Despite the ongoing need for borrowing from abroad, Canada's net foreign asset position has increased by $191.3 billion since the beginning of 2020. The increase is mainly attributable to revaluations due to market prices changes, which pushed Canada's net foreign asset position up by $168.4 billion over this period. The important decline resulting from the collapse of global stock markets recorded in the first quarter was more than offset by the strong recovery in the two subsequent quarters. Since a greater share of Canada's international assets is in the form of equity instruments than its international liabilities, stock price fluctuations tend to have a greater impact on the value of the assets.
Since the beginning of 2020, net borrowings of $41.8 billion from abroad, mostly in the form of debt securities issued by the federal government, have been recorded in the financial account to finance the current account deficit.
Chart 2
Contributors to the change in the net international investment position
Canada's international assets reach the six-trillion-dollar mark
Canada's international assets were up by $139.2 billion to a record high of $6,087.2 billion at the end of the third quarter. The increase was primarily due to the upward revaluation stemming from market price changes (+$174.1 billion). The downward revaluation from the fluctuations in exchange rates (-$57.2 billion) moderated the growth.
On the other side of the ledger, Canada's international liabilities were up $44.8 billion to $4,917.0 billion, on higher market prices (+$46.4 billion) and increased foreign borrowings (+$27.6 billion). The revaluation coming from the fluctuations of the Canadian dollar against foreign currencies (-$28.3 billion) moderated the increase.
Major stock markets almost recovered from their significant first quarter losses. While the Canadian (+3.9%), the US (+8.5%) and the Japanese (+4.0%) stock markets grew, both the European (-1.3%) and the UK (-4.9%) stock markets recorded declines in the third quarter. At the same time, the Canadian dollar gained 2.2% against the US dollar, lost 2.1% against both the euro and the UK pound sterling, and was stable with the Japanese yen.
Chart 3
Canada's international assets and liabilities
Government's gross external debt continues to increase
Canada's gross external debt decreased by $2.6 billion to $3,026.5 billion at the end of the third quarter. It represented 135.4% of Canada's gross domestic product (GDP), down from 151.3% in the second quarter. This proportion was at 123.8% at the end of 2019.
The financial sector, largely deposit-taking corporations, was responsible for the decline. Meanwhile, gross external debt of non-financial corporations rose by $30.4 billion to $486.8 billion.
The government's gross external debt grew for a third consecutive quarter, increasing $12.2 billion to reach $576.2 billion, or 25.8% of the GDP, at the end of the third quarter. In comparison, government's gross external debt totalled $470.0 billion at the end of 2019 (20.1% of the GDP). The federal government substantially expanded its overall borrowing activity in 2020 in order to support Canadian households and firms affected by the COVID-19 pandemic, resulting in a record amount of this debt being acquired by foreign investors. About one-quarter of the government's gross external debt is to be repaid within the next year.
Chart 4
Canada's gross external debt by sector
Note to readers
This release incorporates new information on the quarterly change in Canada's international investment position. The effect of revaluations attributable to market price fluctuations on the value of Canada's international assets and liabilities is now quantified. Data are available from the first quarter of 2018 in table 36-10-0454-01.
Revisions
This release incorporates statistical revisions back to the first quarter of 2017 as part of the annual revision exercise of the Canadian System of Macroeconomic Accounts. Revisions reflect the integration of new data sources as well as improved methodologies.
Currency valuation
The value of assets and liabilities denominated in foreign currencies 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 is 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, a gross basis) in the international investment position. Foreign direct investment can also be presented on a directional principle basis (that is, a 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 liabilities.
Products
The Economic accounts statistics portal, accessible from the Subjects module on our website, features an up-to-date portrait of national and provincial economies and their structures.
The Methodological Guide: Canadian System of Macroeconomic Accounts (13-607-X) is available.
The User Guide: Canadian System of Macroeconomic Accounts (13-606-G) is also available.
The Canada and the World Statistics Hub (13-609-X) is available online. This product illustrates the nature and extent of Canada's economic and financial relationship with the world through 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.
- Date modified: