Statistics Canada
www.statcan.gc.ca
Common menu bar links
Canada's international investment position
Archived Content
Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please "contact us" to request a format other than those available.
Canada's net external liabilities fell to their lowest level in more than a quarter-century during the last three months of 2006, the result primarily of a weakening Canadian dollar.
The country's net liabilities hit $106.8 billion, down 17.4% from the third quarter, the fastest rate of decline on record.
The level at the end of 2006 was lower than the level registered at the end of 1980. At that time, for each dollar of international assets, Canada had $2 of liabilities with non-residents. At the end of 2006, Canada owed only $1.09 to non-residents for each dollar in international assets.
Net liabilities represented only 7.3% of gross domestic product at the end of the fourth quarter, the lowest proportion ever. This was down from 9.0% in the third quarter and far below the peak of 44.3% in 1994.
The weakening of the Canadian dollar had a much stronger positive impact on Canada's international assets than on its liabilities, accelerating the downward trend of Canada's net external liabilities.
The value of Canada's international assets reached $1,192.8 billion at the end of 2006, up $49.5 billion, or 4.3%, from the third quarter. The major reason for the increase was the weakening dollar, which added $54.5 billion to the value of Canadian assets held abroad.
Currency valuationThe value of assets and liabilities denominated in foreign currency are converted to Canadian dollars at the end of each period for which a balance sheet is calculated. Most of Canada's foreign assets are denominated in foreign currencies while less than half of our international liabilities are in foreign currencies. When the Canadian dollar is appreciating in value, the restatement of the value of these assets and liabilities in Canadian dollars lowers the recorded value. The opposite is true when the dollar is depreciating. |
On the other hand, international liabilities rose by 2.1% to $1.299.6 billion. Again, a good portion of the increase was due to changes in valuation driven by the exchange rate. Other factors were large takeover transactions and strong acquisitions of Canadian bonds, but these were partially offset by a large decline in deposits.
The Canadian dollar lost ground against major foreign currencies. It depreciated by 8.2% against the pound sterling, 7.8% against the euro, 6.4% against the Swiss franc, 3.3% against the Japanese yen and 4.1% against the US dollar.
Canadian holdings of foreign bonds up significantly
Canadian holdings of foreign bonds increased a significant 14.1% to $128.5 billion at the end of 2006, compared with the third quarter. These holdings have shown steady increases for the past two years, resulting in a doubling of the position since the end of 2004.
While the majority of these bonds, about $75.5 billion, were issued by the United States, issues by overseas residents increased by more than 25% to $53.1 billion.
Driven by these increases, total Canadian portfolio investment abroad reached $356.2 billion, representing almost 30% of Canada's international assets.
Strong rise in the value of Canadian direct investment abroad
Canadian direct investment abroad reached $533.9 billion at the end of 2006, up 8.0% from the third quarter. This increase was fuelled largely by the weakening of the Canadian dollar, but also by additional investment into foreign economies.
More than half of direct investment abroad is located outside of the United States. The value of direct investment in these countries reached $297.0 billion, up 8.9% from the third quarter.
Canadian deposit assets were down sharply and the level of loan assets decreased marginally, while Canada's official international reserves showed a slight increase.
Another strong increase in foreign direct investment in Canada
Foreign direct investment in Canada jumped by another $14.7 billion at the end of 2006, fuelled by foreign acquisitions of Canadian companies.
This came on the heels of a $14.9 billion increase at the end of the third quarter. Year-end positions on foreign direct investment reached $464.2 billion.
However, the net direct investment position (the difference between Canadian direct investment abroad and foreign direct investment in Canada) increased to $69.7 billion. This indicates a stronger increase in the value of Canadian direct investment abroad.
Substantial increase in foreign holdings of Canadian bonds
Foreign holdings of Canadian bonds reached $398.5 billion at the end of 2006, up $22.7 billion from the end of September. It represented the strongest increase in five years and was driven by large transactions and the weakening of the Canadian dollar.
Foreign investors increased their holdings in bonds of private corporations by $13.2 billion to $172.8 billion and in provincial government bonds by $6.4 billion to $102.0 billion.
On the other hand, foreign holdings of Canadian equities and Canadian money market instruments both declined at the end of the year, to reach $112.5 billion and $24.5 billion respectively.
Canadian deposit liabilities to non-residents decreased by $8.5 billion to $228.9 billion.
Available on CANSIM: tables 376-0055 to 376-0057 and 376-0059.
Definitions, data sources and methods: survey number 1537.
The fourth quarter 2006 issue of Canada's International Investment Position (67-202-XWE) will be available soon.
For general information, contact Client Services (613-951-1855; infobalance@statcan.gc.ca). To enquire about the methods, concepts or data quality of this release, contact Éric Simard (613-951-7244) or Christian Lajule (613-951-2062), Balance of Payments Division.
Table(s).
