Canada's international investment position, second quarter 2023
Second quarter 2023
Canada's net foreign asset position continued its upward trend, reaching $1,256.0 billion at the end of the second quarter, an increase of $162.2 billion from the previous quarter, as growth in international assets exceeded that of international liabilities. For a third consecutive quarter, the increase was led by significant market price gains on the strength of US equity markets.
Overall, changes in market prices led to a $241.3 billion increase in Canada's net foreign asset position in the second quarter. The US stock market gained 8.3%, while the European stock market grew 1.9%. The Canadian market was mostly unchanged at the end of the quarter.
The revaluation effect from fluctuations in exchange rates (-$91.5 billion) lowered the value of assets more than liabilities, moderating the overall increase in Canada's net foreign asset position. Over the second quarter, the Canadian dollar appreciated against the US dollar (+2.2%), the euro (+1.8%) and the Japanese yen (+11.0%), while it depreciated slightly against the UK pound sterling (-0.5%). At the end of the quarter, 96.4% of Canada's international assets were denominated in foreign currencies compared with 40.0% of its international liabilities.
On a geographical basis, Canada's net foreign asset position with the United States was up by $130.7 billion in the second quarter to $991.5 billion. Meanwhile, Canada's net foreign asset position with the rest of the world was up by $31.5 billion to $264.5 billion.
Canada's international assets increase
Canada's international assets were up by $216.5 billion (+2.7%) to $7,975.6 billion at the end of the second quarter, primarily due to higher equity prices. The downward revaluation attributable to the appreciation of the Canadian dollar (-$140.3 billion) moderated the overall increase.
On the other side of Canada's international balance sheet, liabilities were up by $54.3 billion (+0.8%) to $6,719.6 billion. The change was led by financial transactions (+$115.7 billion), predominantly foreign investment in Canadian debt securities. This increase was moderated by the downward revaluation effect (-$48.8 billion) from an appreciating Canadian dollar.
Canada's gross external debt rises
Canada's gross external debt increased by $50.3 billion at the end of the second quarter to $3,654.0 billion. The growth was largely in short-term instruments, those with an original maturity of less than one year.
On a sector basis, the bulk of the increase (+$40.1 billion) was in the financial sector, mainly deposit-taking corporations. The gross external debt of the financial sector stood at $2,292.5 billion at the end of the second quarter. The government sector's gross external debt grew by $23.7 billion, reaching $631.0 billion, the highest level since the first quarter of 2022.
As a percentage of gross domestic product, Canada's gross external debt increased to 129.3% at the end of the second quarter of 2023, up from 128.4% in the previous quarter. The financial sector held the highest proportion of Canada's gross external debt (62.7%), followed by the government sector (17.3%).
Note to readers
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.
International investment position data for the third quarter will be released on December 12, 2023.
The Economic accounts statistics and International trade statistics portals are available from the Subjects module of the Statistics Canada 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.
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