Canada’s net international investment position (NIIP), the balance between its international financial assets and liabilities, has seen a significant increase in the first quarter of 2024. The NIIP rose by $309.5 billion from the end of the fourth quarter of 2023, reaching a record $1,990.2 billion.
The value of Canada’s international assets surged due to strong gains in global stock markets. The U.S. stock market rose by 10.2%, the European market by 12.4%, and the Japanese market by 20.6%, outpacing the Canadian stock market, which increased by 5.8%. These gains contributed $229.9 billion to the revaluation of Canada’s NIIP, given that 69.7% of Canada’s international assets are equity instruments, which are highly sensitive to market fluctuations. Conversely, only 42.8% of international liabilities are equities, resulting in a net positive impact from market revaluation.
Exchange rate changes further bolstered Canada’s NIIP. The Canadian dollar depreciated by 2.4% against the U.S. dollar and by 1.6% against the British pound during the first quarter. This depreciation increased the value of Canada’s international assets, 97.2% of which are denominated in foreign currencies, compared to 41.5% of liabilities. The net effect of these currency fluctuations added $76.9 billion to the NIIP.
Canada’s NIIP with the United States experienced a substantial increase, rising by $267.1 billion to $1,531.6 billion by the end of the first quarter. In contrast, the NIIP with the rest of the world saw a more modest increase of $42.4 billion, totaling $458.7 billion.
Canada’s international assets grew by $408.6 billion (+4.5%) to $9,503.8 billion. This increase was largely driven by market price revaluation (+$370.5 billion) and exchange rate effects (+$126.6 billion), partially offset by divestments totaling $66.9 billion. On the liability side, Canada’s international liabilities increased by $99.1 billion (+1.3%) to $7,513.5 billion, mainly due to higher market prices (+$140.6 billion) and the weaker Canadian dollar (+$49.7 billion).
The financial sector dominates Canada’s international investment landscape. At the end of the first quarter, 69.9% of international assets were held by financial firms, which also accounted for 50.5% of total international liabilities. This sector’s robust asset position significantly contributes to Canada’s net asset position. In contrast, non-financial corporations and the government sector continued to maintain net foreign liability positions.
Canada’s gross external debt decreased by $10.8 billion (-0.3%) to $4,144.9 billion. This decline was driven by a reduction in short-term debt instruments, partially offset by an increase in long-term instruments. Specifically, the financial sector’s gross external debt fell by $54.8 billion to $2,493.2 billion, following a previous significant increase. Meanwhile, non-financial corporations’ gross external debt grew by $31.7 billion (+7.0%) to $483.7 billion, and the government sector’s debt rose by $11.6 billion (+1.8%) to $672.6 billion. By the end of the first quarter, Canada’s gross external debt represented 140.3% of its gross domestic product.