In the Red: Canada’s Account Balances

According to Statistics Canada, Canada’s fourth quarter current account deficit has increased by $0.1 billion to $15.4 billion. This is a seasonally adjusted amount. On an annual basis, our current account deficit increased from $44.9 billion to $65.7 billion in 2015.

The measure is important. It provides a window on all financial transactions between Canada and the rest of the world—and, most notably, measures how much we import versus how much we export.  It should be a good time to export more, in fact, with the value of the Canadian dollar at current low levels. However, the culprit once again is energy prices.

According to the report, “The goods balance reached a record $23.6 billion deficit after posting a slight surplus in 2014. This change largely reflected a $44.8 billion decline in the dollar value of exports of energy products.”

More information about Canada’s prospects with its global trading partners will be evident in the March 22, 2016, federal budget.  Stay tuned here to Knowledge Bureau Report for your easy-to-understand interpretation of the first Liberal budget. You can invite your colleagues and clients to receive a copy at the following link: https://www.knowledgebureau.com/index.php//news.

In the meantime, to brush up on your economics education, Statistics Canada offers the following definitions:

• The balance of international payments covers all economic transactions between Canadian residents and non-residents in three accounts: the current account, the capital account and the financial account.
• The current account covers transactions in goods, services, compensation of employees, investment income and secondary income (current transfers).
• The capital account covers capital transfers and transactions in non-produced, non-financial assets.
• The financial account covers transactions in financial assets and liabilities.

In principle, a net lending (+) / net borrowing (-) derived from the sum of the current and capital accounts corresponds to a net lending (+) / net borrowing (-) derived from the financial account. In practice, as data are compiled from multiple sources, this is rarely the case and gives rise to measurement error. The discrepancy (net errors and omissions) is the unobserved net inflow or outflow.

Refer a Friend	Research	Calculators	Course Trials