New data from Statistics Canada reveals a significant downturn in foreign direct investment during the third quarter of 2025, marking the weakest performance in a year and a half for the Canadian economy.
Quarterly Investment Figures Show Decline
According to the report released on Thursday, foreign direct investment (FDI) into Canada totaled $18.2 billion between July and September. This represents a notable decrease from the $21.9 billion recorded in the previous quarter and stands as the lowest inflow since the beginning of 2024.
The decline was primarily driven by two key factors: mergers and acquisitions activity, along with foreign parent companies choosing to reinvest their earnings back into their Canadian operations. Despite the quarterly drop, the broader trend remains relatively strong when viewed over a longer timeframe.
Broader Economic Context and Outflows
The investment landscape reveals a concerning pattern for Canada's economic standing. The data shows that Canadian investment abroad reached $25.1 billion during the same period, creating a scenario where more direct investment dollars left the country than entered it for the second consecutive quarter.
This net outflow situation occurs against a backdrop of what policymakers have identified as lagging business investment within Canada. The Bank of Canada has repeatedly cited insufficient business outlays as a primary contributor to the country's weak productivity performance.
Policy Responses and Future Outlook
In response to these investment challenges, Prime Minister Mark Carney's government has introduced several measures aimed at stimulating economic activity. The first budget released earlier this month outlined policies designed to support $500 billion in investment over five years.
Key initiatives include tax deductions specifically crafted to provide favorable treatment for companies investing in machinery, equipment, and other technologies. These measures represent a direct attempt to reverse the investment trend and boost Canada's competitive position.
Despite the quarterly decline, there are positive indicators in the broader data. Over the last four quarters, FDI inflows into Canada have totaled $96.6 billion, which remains substantially above the $61.9 billion average recorded over the past decade.
In related economic news, Statistics Canada also reported that the country's current account deficit narrowed significantly to $9.7 billion in the third quarter, down from a revised $21.6 billion in the previous three-month period.
