Canada's international investment position, third quarter 2023
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Released: 2023-12-12
$1,382.4 billion
Third quarter 2023
Canada's net foreign asset position edged up by $5.5 billion and reached $1,382.4 billion at the end of the third quarter, following three consecutive quarters of substantial increases. Overall, the upward revaluation from fluctuations in exchange rates was offset by the downward revaluation due to market price changes, with equity and debt markets slowing in both Canada and the United States.
Chart 1
Canada's net international investment position
The revaluation effect from fluctuations in exchange rates (+$48.8 billion) increased the value of assets more than the value of liabilities in the third quarter, contributing to the overall increase in Canada's net foreign asset position. Over the quarter, the Canadian dollar depreciated against the US dollar (-2.1%) and appreciated against the UK pound sterling (+1.9%), the euro (+1.0%) and the Japanese yen (+1.3%). At the end of the third quarter, 96.5% of Canada's international assets were denominated in foreign currencies (66.6% in US dollars) compared with 42.5% of its international liabilities (30.9% in US dollars).
Meanwhile, changes in market prices led to a $52.6 billion decrease in Canada's net foreign asset position. Over the third quarter, the US stock market declined by 3.6%, while the European market declined by 5.1% and the Japanese market declined by 4.0%. The Canadian market was down by 3.0%.
Chart 2
Contributors to the change in the net international investment position
Direct investment was the largest contributor to Canada's net asset position with the rest of the world at the end of the third quarter. The value of Canadian direct investment abroad was 53.9% greater than the value of foreign direct investment in Canada. Portfolio investment also contributed to Canada's net foreign asset position, with the value of international assets being 7.3% greater than the value of liabilities. Meanwhile, in the other investment category, mostly composed of deposits and loans, the value of international liabilities was 8.4% greater than the value of assets.
Chart 3
Canada's international assets and liabilities by category of investment, third quarter 2023
Canada's international assets and liabilities increase at the same rate
Canada's international assets were up by $57.6 billion (+0.7%) to $8,424.1 billion at the end of the third quarter. This increase was attributable to both the variation of the Canadian dollar compared with foreign currencies (+$84.1 billion) and acquisitions of foreign assets (+$89.2 billion). The downward revaluation (-$146.0 billion) resulting from fluctuations in market prices moderated the overall growth.
Further, Canada's international liabilities amounted to $7,041.6 billion at the end of the third quarter, an increase of $52.2 billion (+0.7%). This gain was the result of the revaluation due to exchange rate movements (+$35.3 billion) and substantial foreign borrowing activities (+$89.3 billion). The downward revaluation (-$93.5 billion) resulting from the fluctuations in market prices of both equity and debt instruments moderated the overall growth.
Chart 4
Canada's international assets and liabilities
Canada's gross external debt rises
Canada's gross external debt, or the value of Canadian debt instruments held by foreign investors, increased by $81.4 billion (+2.1%) at the end of the third quarter to $3,942.3 billion. The increase was driven by the financial sector (+$83.9 billion), mainly transactions of Canadian chartered banks. The financial sector contributed to 60.4% of the total gross external debt at the end of the third quarter. In contrast, the government sector's gross external debt decreased by $19.1 billion to $611.9 billion and represented 15.5% of Canada's gross external debt at the end of the third quarter.
As a percentage of gross domestic product, Canada's gross external debt edged up to 135.8% at the end of the third quarter from 135.0% in the previous quarter.
Chart 5
Canada's gross external debt as a percentage of gross domestic product
Note to readers
Revisions
This release incorporates statistical revisions back to 2017. Revisions reflect the integration of benchmark survey data and new data sources as well as updates to coverage and statistical methods. Quarterly foreign direct investment positions were benchmarked to revised annual estimates as published in April 2023 following major improvements obtained by complementing surveys with administrative data. Series on financial derivatives introduced in December 2022 now begin with the reference year 2017.
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.
Next release
International investment position data for the fourth quarter of 2023 will be released on March 12, 2024.
Products
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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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