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Canada's international investment position, fourth quarter 2013

Released: 2014-03-13

Canada's net foreign debt was reduced by $98.1 billion in the fourth quarter, edging Canada into a net asset position of $26.7 billion. The decline was attributable to relatively stronger foreign equity markets and a weaker Canadian dollar, which raised the value of Canada's international assets more than it increased the value of its international liabilities.

Over the course of 2013, Canada's overall net international investment position increased by $328.8 billion, despite an ongoing current account deficit. Geographically, Canada's net foreign indebtedness with the United States decreased by $176.4 billion to $280.0 billion at the end of 2013. At the same time, Canada's net asset position with the aggregate "other countries" increased by $152.4 billion to $306.7 billion.

Chart 1  Chart 1: Canada's international investment position - Description and data table
Canada's international investment position

Chart 1: Canada's international investment position - Description and data table

International assets outpace international liabilities, led by stronger foreign equity markets

Canada's international assets increased by $239.6 billion to $2,911.5 billion by the end of the fourth quarter. This was the result of gains associated with the strong performance of foreign stock markets as well the weaker Canadian dollar's upward revaluation effect on foreign currency denominated international assets. Over the quarter, the Canadian dollar lost 3.1% against the US dollar, 5.4% against the British pound and 4.9% against the euro but gained 3.7% against the Japanese yen. During the same period, the US Standard and Poor's 500 stock market index increased by 9.9%.

For their part, Canada's international liabilities increased by $141.5 billion in the fourth quarter to $2,884.8 billion, largely as a result of gains in Canadian stock prices. Inflows of funds from abroad to finance the ongoing current account deficit and the upward revaluation of selected liabilities denominated in foreign currencies added to the overall increase in Canadian international liabilities.

Canada's net foreign liability position on portfolio investment declines again

Canada's net liability on cross-border holdings of securities declined for a fifth straight quarter, reaching $229.5 billion. The increase in Canadian holdings of foreign securities was led by the strong performance on foreign equity markets. The gains in non-resident holdings of Canadian liabilities were less pronounced and mainly resulted from higher Canadian stock prices.

Chart 2  Chart 2: Portfolio investment position - Description and data table
Portfolio investment position

Chart 2: Portfolio investment position - Description and data table

Canada's net foreign asset position on direct investment expands further

Canada's net asset position on cross-border direct investment increased by $54.5 billion to $170.9 billion at the end of the fourth quarter. Canadian direct investment abroad increased by $95.7 billion to $1,222.6 billion. Higher foreign equity prices were the largest contributor to this change. Generally stronger foreign currencies relative to the Canadian dollar also supported asset growth in the quarter, as a result of the upward revaluation of these assets. On the other side of the ledger, the value of foreign direct investment in Canada was up $41.2 billion to $1,051.6 billion. This reflected the appreciation of Canadian equity prices on non-resident assets, as well as direct investment inflows from abroad of $10.4 billion in the quarter.

Chart 3  Chart 3: Direct investment position - Description and data table
Direct investment position

Chart 3: Direct investment position - Description and data table

  Note to readers

The main measure of the International Investment Position Account now incorporates market valuation for tradeable securities and foreign direct investment equity. This presentation adds a further dimension to the analysis of Canada's net international investment position and more accurately reflects changes in that position. The International Investment Position at book value is still available, as the annual foreign direct investment release includes geographical and industry details. For more information see Valuation of assets and liabilities.

Currency valuation

The value of assets and liabilities denominated in foreign currency is 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 Canada's 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 Canadian dollar is depreciating.

Change to annual revision practices

The Canadian System of macroeconomic accounts is implementing a new revision policy. Annual revisions for Canada's international investment position, which affect the three most recent calendar years, will take place in December rather than June, as was previously the practice. For more information, see Latest Developments in the Canadian Economic Accounts (Catalogue number13-605-X).

Definitions

The international investment position presents 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.

The excess of international liabilities over assets can be referred to as Canada's net foreign debt.

The excess of international assets over liabilities can be referred to as Canada's net foreign assets.

Contact information

For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; infostats@statcan.gc.ca) or Media Relations (613-951-4636; mediahotline@statcan.gc.ca).

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