Balance of International Payments
The balance of international payments is a statistical statement that summarizes economic transactions between Canadian residents and non-residents during a given period. The economic transactions between residents and non-residents are presented in two main groups of accounts: the current and capital accounts, and the financial account.
The current and capital accounts cover transactions in goods, services, primary income (compensation of employees and investment income), secondary income (current transfers), capital transfers and non-produced non-financial assets. The financial account records transactions of financial instruments.
A current account deficit means that in the accounting period, Canada spent more than it earned through selling goods and services and that it received through compensation of employees, investment income or transfers. A current account surplus means that Canadian residents earned more than they spent on goods and services and that they paid for compensation of employees, investment income or the funds they transferred to non-residents.
In principle, a current and capital accounts’ deficit or surplus is equal to a net borrowing (surplus) or net lending (deficit) in the financial account. In practice, this is rarely the case due to limitations in source data, which gives rise to imbalances. This imbalance is referred to as the ‘discrepancy’ (net errors and omissions) and is identified separately in the balance of international payments. It represents the unobserved net inflow or outflow needed for the balance of international payments to ‘balance’.
The Canadian balance of international payments are grouped into the following set of accounts:
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