Photographer: Brent Lewin/Bloomberg

Canada's Reliance on Foreign Financing Grows as Exports Tumble

Canada’s reliance on foreign financing rose to near record levels in the third quarter as exporters continue to struggle.

The country’s current account deficit -- what it needs to borrow from the rest of the world to finance spending -- widened to C$19.3 billion, the third highest on record. Economists had forecast a C$20 billion deficit.

Canada has booked current account deficits for 36 straight quarters, worth more than C$500 billion over that time.

While the current account gaps have narrowed from records reached in 2015, they remain elevated and are a source of vulnerability if foreigners grow wary of financing the nation’s expansion.

Exports in recent months have suffered one of their biggest tumbles ever, fueling concern the nation’s currency had accelerated too quickly earlier this year.

The slumping trade performance also means Canada’s expansion lost a major engine, reinforcing expectations growth is poised to slow in the second half of the year.

Highlights of 3rd-Qtr Balance of Payments Report

  • The deficit in goods widened to C$8.9 billion in the third quarter, the second highest on record as exports dropped by C$11 billion
  • The second quarter deficit was revised to C$15.6 billion from C$16.3 billion
  • Services deficit was little changed at C$6.1 billion
  • Current account deficit was financed by C$51.6 billion of Canadian bond purchases, the largest since 2015
  • Foreign purchases of federal government bonds hit record level C$21.8 billion

— With assistance by Erik Hertzberg

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