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March 02, 2015CANADA'S BALANCE OF INTERNATIONAL PAYMENTS Q4 AND ANNUAL 2014 Canada's balance of payments showed a wider current account deficit of $13.9 billion in the fourth quarter - an increase of $4.3 billion from the Q3 deficit of $9.6 billion.
On the current account, the higher deficit is primarily attributable to falling goods exports. Good imports continue to rise, leaving a deficit of $2.0 billion in goods trade (vs. a surplus of $2.9 billion in Q3). Services trade continues to report a deficit of $5.5 billion, little changed from previous quarters. The investment income gap stands at $5.7 billion while the seconday income deficit - primarily personal and government transfers - shrunk to $0.1 billion.
The balance of payments in goods, services, investment income and transfers must be offset by change in the flow of financial assets between Canada and the rest of the world. The current account deficit requires capital account inflows as foreigners increase their net holding of Canadian financial assets above any net increase of Canadian financial assets acquired abroad. Through much of the period after the recession, foreign direct investment in Canada was diminished while foreign portfolio investment in Canada expanded. Since 2012, this pattern has reversed and there was very little net foreign portfolio investment in Canada. There was a large increase in other foreign investments - particularly foreign currency bank deposits held by non-residents in Canada. However, this was partially offset by a significant increase in Canadian direct investment abroad.
2014 ANNUAL
Canada's current account deficit for 2014 was $43.5 billion - the smallest deficit since the global recession ended Canada's 10-year run of surpluses. Both exports and imports of goods were up substantially, but there was an overall surplus of $4.9 billion in trade of goods. However, this surplus is much smaller than those reported in pre-recession periods. The deficit in both services trade (-22.7 billion) and investment income (-22.2 billion) were little changed from 2013.
The financial account for 2014 shows a strong net inflow of capital in other investments. Specifically, this indicates that Canada's current account deficit for 2014 was largely funded by increases in foreign holdings of Canadian bank deposits.
Statistics Canada, CANSIM tables 376-0101 through 376-0108