Thu, 15 Apr 2021

Canada's current account deficit down in Q4

Xinhua
02 Mar 2021, 04:18 GMT+10

OTTAWA, March 1 (Xinhua) -- Canada's current account deficit, on a seasonally adjusted basis, decreased 3.2 billion Canadian dollars (about 2.52 billion U.S. dollars) to 7.3 billion Canadian dollars in the fourth quarter of 2020, according to Statistics Canada on Monday.

This decrease was due to a higher investment income surplus and a lower trade in goods and services deficit.

Investment income receipts were up in the fourth quarter after three consecutive quarterly reductions, while payments were down for the fourth quarter in a row.

At the same time, the trade in goods deficit edged down but remained high historically, while the trade in services balance continued to record an unusual surplus position.

In the financial account, inflows of funds from abroad to finance the current account deficit came primarily from transactions in currency and deposits.

Overall, foreign holdings of these instruments in Canada increased considerably over the quarter.

Meanwhile, portfolio and direct investment activity both generated a net outflow of funds from the economy. Strong Canadian acquisitions of foreign shares combined with weak foreign direct investment activity in Canada relative to Canadian direct investment abroad contributed to the net outflow of funds in the quarter.

For 2020, the COVID-19 pandemic and all related measures put in place to stem its spread and support Canadian businesses and households had a major impact on the balance of payments flows, both in the current and financial accounts.

The current account deficit dropped 4.7 billion Canadian dollars to 42.7 billion Canadian dollars in 2020.

The investment income account was the major contributor to this decline. Its balance moving from a deficit of 2.2 billion Canadian dollars in 2019 to a surplus of 10.1 billion Canadian dollars in 2020.

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