Canada's international investment position, third quarter 2024
Released: 2024-12-11
$1,865.3 billion
Third quarter 2024
Canada's net foreign asset position edged up by $11.6 billion to reach $1,865.3 billion at the end of the third quarter, following three consecutive quarters of substantial increases. Year over year, Canada's net foreign asset position grew by $628.2 billion, largely on the strength of the US stock market, which Canadian investors are heavily exposed to. Over the third quarter, Canada's international assets and liabilities grew significantly, driven by the rise in both equity and debt instruments prices.
Chart 1
Canada's net international investment position
Changes in market prices led to a $41.4 billion increase in Canada's net foreign asset position in the third quarter. The US stock market gained 5.5% in the quarter, and the European stock market was up 2.2%. Meanwhile, the Canadian stock market grew by 9.7%, the largest increase since the second quarter of 2020, a time of turbulence for the global stock markets at the onset of the COVID-19 pandemic. International assets were more concentrated in equities (68.5% at the end of the third quarter of 2024) than international liabilities were (44.4%). Consequently, stock market fluctuations contributed to a higher upward revaluation of assets than liabilities in the quarter.
In the third quarter, funds borrowed from abroad (-$8.4 billion) to finance the current account deficit, as well as the revaluation effect resulting from fluctuations in exchange rates (-$8.1 billion), moderated the overall increase in Canada's net foreign asset position. Over the quarter, the Canadian dollar gained 1.4% against the US dollar and depreciated against the euro (-2.8%), the British pound (-4.3%) and the yen (-10.0%). At the end of the third quarter, 96.4% of Canada's international assets were denominated in foreign currencies (66.6% in US dollars) compared with 39.5% of its international liabilities (28.1% in US dollars).
Chart 2
Contributors to the change in the net international investment position
Canada's international assets largely invested in the United States
On a geographical basis, Canada's net foreign asset position with the United States decreased by $21.3 billion to $1,641.2 billion at the end of the third quarter. Meanwhile, Canada's net foreign asset position with the rest of the world was up by $33.0 billion to $224.1 billion. Traditionally, Canada has been a net debtor to the United States, but this trend reverted, and Canada has been a net creditor to the United States without interruption since the end of 2016.
Canadian investors are strongly exposed to the United States financial markets. At the end of the third quarter of 2024, 59.0% of Canada's international assets were in the United States; it was 49.5% 10 years ago. Canadian holdings of US equity instruments, both direct and portfolio, largely contributed to the increase over that period.
Conversely, the share of Canada's international liabilities with the United States went down from 60.9% 10 years ago to 52.3% at the end of the third quarter of 2024. The share of direct and portfolio investment in Canada held by US investors both declined over the period.
Chart 3
Canada's net international investment position, by region
Rising market prices boosts both international assets and liabilities
Canada's international financial assets were up by $378.6 billion (+4.0%) to $9,875.2 billion at the end of the third quarter. The growth was driven by the upward revaluation due to market price changes (+$324.8 billion); acquisitions of foreign assets (+$64.0 billion) also contributed but to a lower extent. The downward revaluation (-$19.8 billion) resulting from fluctuations in exchange rates moderated the overall growth. At the end of the third quarter, 68.4% of Canada's international assets were held by firms from the financial sector.
Canada's international liabilities were up $367.0 billion to $8,009.9 billion at the end of the third quarter. Revaluations resulting from the fluctuations in market prices (+$283.4 billion) contributed the most to the increase, which was slightly offset by the downward revaluation coming from the fluctuations of the Canadian dollar against foreign currencies (-$11.7 billion). Investments from abroad (+$72.5 billion), led by foreign acquisitions of Canadian bonds (+$49.8 billion), also contributed to the increase. At the end of the third quarter, the financial sector accounted for 49.0% of Canada's total international liabilities, compared with 34.8% for non-financial corporations.
Chart 4
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, increased by $88.6 billion (+2.1%) to reach $4,284.3 billion at the end of the third quarter, representing 139.2% of the gross domestic product.
On a sector basis, the government sector's gross external debt grew by $42.0 billion to reach $788.2 billion at the end of the third quarter, a fourth consecutive quarterly increase. The gross external debt of the financial sector, dominated by deposit-taking corporations, amounted to $2,474.2 billion and represented 57.8% of Canada's gross external debt at the end of the third quarter.
Chart 5
Canada's gross external debt as a percentage of gross domestic product
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Note to readers
Revisions
This release incorporates statistical revisions back to 2021 as part of the annual revision exercise of the Canadian System of Macroeconomic Accounts. Revisions reflect the integration of benchmark survey data and new data sources as well as enhanced methodologies increasing the quality of the data published. Specifically, the newest annual benchmark estimates at book value for foreign direct investment, released in April, were integrated and adjustments to the methodology to derive the market value were made to enhance these estimates.
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 2024 will be released on March 12, 2025.
Products
The Economic accounts statistics and International trade statistics portals are available from the Subjects module of the Statistics Canada website.
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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