Canada's international investment position, second quarter 2021
Released: 2021-09-09
$1,501.9 billion
Second quarter 2021
Canada's net foreign asset position continued its upward trend to reach $1,501.9 billion at the end of the second quarter, an increase of $113.2 billion from the previous quarter. For a fifth consecutive quarter, the increase was led by significant changes in market prices and was moderated by downward revaluations resulting from fluctuations in exchange rates.
In comparison, Canada's net foreign asset position stood at $978.8 billion at the end of 2019, prior to the pandemic. Following the decrease caused by uncertainties in the early days of the pandemic, Canada's net foreign asset position rose, mainly on the strength of US equity prices. At the end of the quarter, more than two-fifths (41.0%) of Canada's total international assets consisted of US equity instruments.
Chart 1
Canada's net international investment position
Changes in market prices led to a $165.1 billion increase in Canada's net foreign asset position in the second quarter. US stock market grew by 8.2% and the Canadian stock market by 7.8%. Meanwhile, European stock markets had a lower growth, and the Japanese stock market posted a small decrease. Stock market conditions impact Canada's international assets more than its liabilities, as a higher proportion of international assets (73.6%) are held in the form of equities than liabilities (44.6%).
The revaluation effect resulting from fluctuations in exchange rates (-$46.6 billion) moderated the overall increase in Canada's net foreign asset position. Over the quarter, the Canadian dollar appreciated against major currencies. It gained 1.5% on the US dollar, 0.4% on the euro, 1.2% on the UK pound sterling, and 1.7% on the Japanese yen. At the end of the quarter, 96.5% of Canada's international assets were denominated in foreign currencies, compared with 36.3% of its international liabilities.
Chart 2
Contributors to the change in the net international investment position
On a geographical basis, Canada's net foreign asset position with the United States was up 23.9% to $875.3 billion and was down 8.2% to $626.7 billion with the rest of the world at the end of the second quarter.
Canada's international assets and liabilities increase
Canada's international assets were up by $326.6 billion to a record $7,050.9 billion at the end of the second quarter. The revaluation due to market price changes (+$315.9 billion) contributed the most to the increase. Significant acquisitions of foreign securities, in the form of shares (+$37.2 billion) and bonds (+$19.5 billion), as well as direct investment abroad (+$22.2 billion) also contributed to the rise. This growth was nonetheless mitigated by the downward revaluation from exchange rate fluctuations (-$71.5 billion).
On the other side of the ledger, Canada's international liabilities amounted to $5,548.9 billion at the end of the second quarter, an increase of $213.5 billion. The rise, mostly caused by the revaluation of assets in Canada held by non-residents due to market price increases (+$150.8 billion), was slightly moderated by the impact of the exchange rate movements on the value of these assets (-$24.8 billion). While inflows from direct investment in Canada were modest, foreign investors added $50.0 billion of Canadian debt securities to their holdings in the second quarter.
Chart 3
Canada's international assets and liabilities
Canada's gross external debt increases
Canada's gross external debt, or the value of Canadian debt instruments held by foreign investors, was up by $43.0 billion to $3,074.3 billion at the end of the second quarter. It amounted to 124.9% of the gross domestic product, a decrease compared with the high of 151.2% recorded a year ago, at the end of the second quarter of 2020. This proportion was at 123.8% at the end of 2019, before the pandemic.
The government sector's gross external debt grew by $46.6 billion to $599.9 billion. Foreign borrowings in the form of bonds (+$19.0 billion) and money market instruments (+$27.0 billion) accounted for most of the increase in the quarter.
The financial sector—mainly deposit-taking corporations—saw its gross external debt decline by $9.3 billion to $1,708.4 billion. At the end of June, the financial sector still contributed to the highest proportion of Canada's gross external debt at 55.6%, followed by the government sector at 19.5%.
Chart 4
Canada's gross external debt as a percentage of gross domestic product
Note to readers
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, 36-10-0009-01 and 36-10-0659-01. 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 and International Trade Statistics portals are available from the Subjects module of our website.
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.
The product Canada's international trade and investment country fact sheet (71-607-X) is available online. This product provides easy and centralized access to Canada's international trade and investment statistics, on a country-by-country basis. It contains annual information for nearly 250 trading partners in summary form, including charts, tables and a short analysis that can also be exported in PDF format.
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.
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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