Canada’s net foreign asset position drops $103.2 billion in Q1

Investing.com -- Canada’s net foreign asset position fell by $103.2 billion to $1,824.8 billion at the end of the first quarter of 2025, marking the first decrease since the third quarter of 2023, according to data released by Statistics Canada on Wednesday.

The decline was primarily driven by market price changes, which resulted in a negative revaluation effect of $180.1 billion. This decrease was influenced by the performance of global stock markets, particularly the 4.6% drop in the U.S. stock market, where most of Canada’s international equity assets are held. In contrast, Canadian and European stock markets grew by 0.8% and 7.2% respectively during the same period.

Exchange rate fluctuations partially offset the decline, contributing a positive revaluation effect of $42.6 billion. While the Canadian dollar strengthened slightly against the U.S. dollar by 0.09%, it weakened against the euro (-3.9%), the British pound (-2.9%), and the Japanese yen (-4.4%).

Canada’s international assets decreased by $26.9 billion to $10,298.3 billion, the first reduction since the second quarter of 2022. This decline occurred despite new investments abroad of $51.2 billion, mostly in foreign securities, and positive exchange rate effects of $55.1 billion.

Meanwhile, Canada’s international liabilities increased by $76.3 billion to $8,473.4 billion, mainly due to market price revaluations of $74.8 billion and foreign borrowing through debt securities. Foreign divestments in Canadian equity securities, amounting to $40.6 billion, moderated this increase.

Canada’s gross external debt rose by $99.1 billion to $4,650.8 billion, representing 146.5% of gross domestic product, up from 135.7% in the first quarter of 2024. The financial sector accounted for 59.1% of this debt, with its portion increasing by $65.8 billion to $2,746.8 billion. The government sector’s external debt grew by $14.5 billion to $849.2 billion, marking its sixth consecutive quarterly increase.

The country’s net foreign asset position with the United States saw an unprecedented quarterly decrease of $177.8 billion, falling to $1,553.3 billion. This decline stemmed from lower values in both portfolio investment assets (-$82.2 billion) and direct investment assets (-$64.7 billion) in the United States, largely due to falling U.S. equity prices.

In contrast, Canada’s net foreign asset position with the rest of the world improved by $74.7 billion to $271.5 billion, mainly due to positive revaluations from exchange rates and market prices.

Despite the first-quarter decline, Canadian direct investment in the United States has consistently exceeded U.S. direct investment in Canada since the first quarter of 2015. Similarly, since the fourth quarter of 2019, Canadian portfolio investment in the United States has surpassed U.S. portfolio investment in Canada, driven primarily by Canadian holdings of U.S. equities.

This article first appeared in Investing.com