By Ketki Saxena
Investing.com -- Canada's net foreign asset position - defined as the difference between Canada's international financial assets and international liabilities- posted a second significant consecutive quarterly decline, Statistics Canada reported today.
Canada’s net foreign asset position was down by $230.2 billion to $875.1 billion at the end of the second quarter, and down $627.5 billion for the first half of the year from the record high reached at the end of 2021.
Both international assets and liabilities decreased substantially in the quarter as global equity markets fell sharply.
Canada's international assets were down by 7.5% to $6,817.9 billion at the end of the second quarter, the largest percentage decrease since the third quarter of 2008 and the global financial crisis. The decrease was largely attributable to the decline in foreign stock prices, especially in the US market, which declined by 14.1% this quarter.
New investments abroad primarily in the form of direct investment and revaluation due to exchange rate movements moderated the decrease.
On the other side of the balance sheet, Canada's international liabilities fell by -5.1% to $5,942.8 billion, driven lower largely by falling Canadian equity prices, which were down 12.2% for the quarter. The decline was moderated by inflows of funds from abroad and upward revaluations due to a weaker loonie, which declined 3.0% against the US dollar this quarter.
At the end of q2 2022, 96.7% of Canada's international assets were denominated in foreign currencies, compared with 37.5% of its international liabilities.
Canada's gross external debt - i.e the total value of Canadian debt instruments held by foreign investors, which now amounts to 115.2% of GDP -rose by $23.5 billion to $3,239.7 billion. The financial sector continued to hold the highest proportion of Canada's gross external debt (59.3%), followed by the government sector (18.6%).