By Robb M. Stewart
OTTAWA--Canada's net international investment position increased for a fifth consecutive quarter in the final months of last year, driven largely by the depreciation in the currency against the U.S. dollar.
The country's international investment position, the difference between external assets and external liabilities, stood at 1.995 trillion Canadian dollars, the equivalent of roughly $1.386 trillion, at the end of December, Statistics Canada said Wednesday. That marked an increase of C$166.6 billion from the quarter before.
Compared with a year earlier, the net foreign asset position grew by C$570.8 billion, which the data agency said was led by revaluations resulting from market price changes and fluctuations in exchange rates.
The country's international assets increased by C$543.3 billion from the prior quarter, buoyed by the revaluation effect of exchange rate fluctuations as well as acquisitions, while international liabilities were up C$376 billion on the third quarter with growth in foreign borrowings of currency and deposits, as well as debt securities.
A country's net international investment position plays an important role in adjustments to economic shocks, according to Bank of Canada research. The research also indicates that foreign financial inflows may also help encourage a buildup of financial system vulnerabilities by fuelling an increase in leverage.
Canada's gross external debt, the value of Canadian debt instruments held by foreign investors, increased 6.3% to C$4.555 trillion at the end of the fourth quarter. That represented 145.3% of the gross domestic product, the highest proportion since the second quarter of 2020 at the beginning of the Covid-19 pandemic.
On a geographic basis, 60% of all of Canada's foreign financial assets and 53% of all liabilities were with the U.S. at the end of 2024. That resulted in Canada being in a net foreign asset position to the U.S. amounting to C$1.79 trillion at year end.
Canada traditionally has been a net debtor to the U.S. but this trend reverted and Canada has been a net creditor to its neighbor without interruption since the end of 2016, which correlates with growth in the U.S. stock market over the past decade.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
March 12, 2025 09:28 ET (13:28 GMT)
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