Canada posts biggest decline in FDI in 14 years
UNSPLASH PHOTO
Canada recorded one of the largest declines in foreign direct investment (FDI) ever in the first three months of this year, a drying up of capital flows that will stoke worries about the nation’s underlying economic fundamentals.
Foreign direct investment into Canada fell by $3.4 billion in the first quarter, according to data released by Statistics Canada on Thursday. It’s the largest one-quarter decline since 2010. Canadian direct investment abroad, meanwhile, jumped higher to $32.6 billion in the quarter — a number that is well above the historical average.
While the data may be reflecting a one-off sale by HSBC of its Canadian subsidiary (the Statistics Canada release didn’t provide specifics on what triggered the drop), it will still add to worries about capital flight out of the country.
The governing Liberals have been recently touting success in attracting foreign direct investment. Foreign companies have invested a net $200 billion over the past three years, but today’s numbers will raise questions about whether that trend is sustainable.
Source: Statistics Canada
At the same time, the government has been silent about outflows by Canadians that have eclipsed inflows by a large amount. Today’s numbers suggest that not only have inflows dried up, but Canadians are only accelerating investment abroad – a double whammy for the government.
Net investment flows – the difference between how much foreign companies invest here on a net basis versus how much Canadian firms invest abroad – recorded a negative $36 billion in the first quarter. That is one of the worst readings on record. Since 2019, Canada has experienced net direct investment outflows of $212 billion.
