In the dynamic landscape of global economics, Canada’s direct investment abroad has witnessed a significant surge in 2023, marking a substantial growth trajectory. According to the latest data released by Statistics Canada, the stock of Canadian direct investment abroad escalated by $138.8 billion, reaching a commendable $2,171.3 billion by the close of the year. Concurrently, foreign direct investment in Canada also experienced an upward trajectory, increasing by $52.4 billion to $1,360.3 billion. Consequently, Canada’s net direct investment position with the rest of the world expanded by $86.4 billion to $811.0 billion.
Over the past decade, Canada’s net direct investment position has notably expanded, propelled primarily by robust growth in the stock of Canadian direct investment abroad compared to the variation in foreign direct investment within Canada.
The surge in Canadian direct investment abroad in 2023 was chiefly driven by equity investments, including acquisitions of foreign enterprises and reinvested earnings by Canadian direct investors in their existing foreign affiliates. Notably, investments in sectors such as finance and insurance, management of companies and enterprises, and mining and oil and gas extraction witnessed substantial growth, contributing significantly to the overall increase. However, some sectors, including construction and real estate, experienced slower growth rates or declines compared to the previous year.
Geographically, the United States emerged as the primary destination for Canadian direct investment abroad, with investments in the U.S. accounting for nearly half of all holdings at the end of 2023. Investments in Europe also held substantial weight, representing 21.2% of all holdings, with notable investments in countries such as the United Kingdom, Luxembourg, the Netherlands, and Hungary. Furthermore, Canadian direct investment in Asia/Oceania exhibited the highest percentage increase, driven predominantly by the finance and insurance sector.
Foreign direct investment in Canada witnessed notable increases in the manufacturing sector, with investments surging by $25.9 billion in 2023. Subsectors such as food manufacturing, paper manufacturing, and transportation equipment manufacturing were primary contributors to this growth. However, the mining and oil and gas extraction sector experienced a slight reduction following previous increases in the preceding years. Additionally, the professional, scientific, and technical services sector saw a considerable uptick in foreign direct investments, reaching $54.1 billion by the end of 2023.
While foreign direct investment is traditionally measured on an immediate investor country basis, analyzing it on an ultimate investor country basis provides valuable insights into the ultimate controllers of investments. Notably, countries like the Netherlands and Luxembourg often act as intermediaries for investments, directing funds to other countries. On an ultimate investor country basis, foreign direct investment in Canada from Europe accounted for a significant portion, highlighting the complex network of global investment flows.
An intriguing observation is that a significant proportion (53.9%) of Canadian direct investors’ holdings abroad were in foreign affiliates operating in industries different from their own. This trend indicates a diversification strategy employed by Canadian investors, particularly those from sectors such as management of companies and enterprises, wholesale trade, and utilities. Conversely, investors from sectors like finance and insurance, transportation and warehousing, and mining, quarrying, and oil and gas extraction predominantly invested in their own industries.
In conclusion, the surge in Canadian direct investment abroad in 2023 reflects Canada’s growing prominence in the global investment landscape. As Canada continues to expand its economic footprint internationally, understanding the intricacies of investment patterns and dynamics is crucial for policymakers, investors, and stakeholders alike.