Canada's current-account deficit continued to narrow in the final quarter of last year, driven by a rise in the goods surplus. However, for the entire year, the country's deficit expanded due to a decline in goods exports caused by lower energy prices.
Details of the Deficit
The country's current account, which serves as the most comprehensive measure of Canada's trading and investing activities with other nations, stood at a deficit of 1.62 billion Canadian dollars in the fourth quarter of 2023. This amount is approximately $1.2 billion in US dollars, as reported by Statistics Canada on Wednesday.
Market analysts had anticipated the deficit to narrow to around C$1.97 billion, in contrast to the actual figure. Additionally, the deficit from the previous quarter was revised to C$4.74 billion from the initial estimate of C$3.22 billion.
Canada's Trade Surplus Grows in Fourth Quarter
The surplus on Canada's trade in goods widened to C$3.01 billion for the recent quarter, from C$441 million in the third quarter. This increase was mainly due to higher volumes of crude oil exports and a rise in exports of consumer goods, chemical, plastic, and rubber products.
Services Deficit Narrows
The trade in services deficit narrowed by C$649 million on-quarter to C$1.76 billion. The travel services surplus expanded as expenses of non-residents visiting Canada increased while expenses of Canadians traveling abroad decreased in the fourth quarter.
Investment-Income Balance Improves
In addition, the investment-income balance shifted from a slight deficit of C$28 million in the third quarter to a modest C$112 million surplus in the final quarter.
Annual Current-Account Deficit Widens
For the year, Canada's current-account deficit widened by C$7.45 billion to C$17.76 billion. This was largely due to the balance on trade in goods swinging to a deficit of C$1.83 billion from a C$19.71 billion surplus in 2022.
Impact on Exports
Although annual exports of energy products were the second-highest on record, lower prices led to a decrease in overall exports for the year. On the other hand, exports of motor vehicles and parts increased, despite a rise in imports, as the supply chain issues in the automotive industry began to alleviate.
Canada's Investment-Income Balance Surges in 2023
The investment-income balance of the country saw a significant shift, moving to a surplus of C$7.37 billion in 2023 from a deficit of C$4.26 billion the previous year. This change was driven by increased profits earned by Canadian direct investors abroad, coupled with decreased profits earned by foreign direct investors in Canada. This notable swing exemplifies a changing landscape in the investment sector, indicating potential opportunities and challenges for the future.
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