Canadian direct investment abroad balloons in 2018

StatsCan says the stock of foreign direct investment in Canada rose by 5% in 2018 to $877 billion

The stock of Canadian direct investment abroad grew at a faster rate in 2018, largely as a result of valuation gains from a weaker Canadian dollar, according to Statistics Canada.

The growth in the stock of foreign direct investment in Canada also picked up pace at five per cent when compared with the two previous years, the federal agency reported on Wednesday.

“The stock of Canadian direct investment abroad increased by 10.4 per cent in 2018 to reach $1,289 billion. On an instrument basis, almost all of the increase was due to higher equity positions (up $115 billion to $1,198 billion), with debt balances up $6 billion to $91 billion,” said StatsCan.

“While the growth in the stock of Canadian direct investment abroad in 2018 was significantly higher than in the previous two years, the majority of that increase was due to valuation gains from a weaker Canadian dollar, which resulted in a $72 billion upward revaluation of Canada’s direct investment position. In 2018, the Canadian dollar depreciated by 8.7 per cent against the US dollar, 3.7 per cent against the euro and 2.8 per cent against the British pound.”

It said nearly three-quarters of the 2018 increase in the stock of Canadian direct investment abroad was due to higher investment positions in the North America region, primarily the United States (up $70 billion to $595 billion). Most of the remaining increase was in Europe, led by higher investment in the United Kingdom (up $12 billion to $109 billion) and Luxembourg (up $8 billion to $90 billion).

“On an industry basis almost half of the growth in the stock of direct investment abroad in 2018 was in the finance and insurance industry (up $53 billion to $471 billion), with the transportation and warehousing as well as the management of companies and enterprises industries also showing significant increases. This growth was partially offset by declines in the information and cultural industries and in mining (except oil and gas).

“The transportation and warehousing industry in particular has experienced a period of rapid growth in recent years, with the overall investment position increasing by nearly 150 per cent from $34 billion in 2014 to $84 billion in 2018. This was largely driven by merger and acquisition activity in the United States,” added the federal agency.

“Finance and insurance (37 per cent) continued to be the most significant industry for Canadian direct investment abroad in 2018, followed by mining and oil and gas extraction (15 per cent) and management of companies and enterprises (13 per cent).”

StatsCan said the stock of foreign direct investment in Canada rose by five per cent in 2018 to $877 billion. The increase was the largest in four years and was the result of higher equity positions (up $44 billion to $732 billion), moderated by lower debt instrument positions (down $2 billion to $145 billion). The increase in the equity position was stimulated by a pickup in merger and acquisition activity following a net decline in this activity in 2017.

– Mario Toneguzzi


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