Full Breakdown
Decline in Foreign Direct Investment in Canada: Q3 2025 Overview
11/29/2025, 2:47:53 PM
Current Trends in Foreign Direct Investment
Foreign direct investment (FDI) in Canada experienced a significant decline in the third quarter of 2025, totaling C$18.2 billion ($12.9 billion). This figure marks the lowest level of FDI since the second quarter of 2024, down from C$21.9 billion in the previous quarter and C$29.9 billion during the same period in 2024. The decline is attributed primarily to mergers and acquisitions, alongside foreign parent companies reinvesting their earnings in Canadian affiliates, which accounted for C$9.6 billion and C$5.4 billion, respectively.
Despite this downturn, the total FDI over the past four quarters remains robust at C$96.6 billion, significantly exceeding the ten-year average of C$61.9 billion. The sectors attracting the most investment include trade and transportation, finance and insurance, and manufacturing. Geographically, the majority of FDI in Canada during this quarter originated from the United States and the United Kingdom, which together contributed two-thirds of the total.
Economic Implications and Government Response
The decline in FDI is raising concerns among Canadian policymakers, particularly regarding its implications for national productivity. The Bank of Canada has identified insufficient capital spending as a critical factor contributing to the country's lackluster productivity growth. In response to these challenges, Prime Minister Mark Carney introduced measures in his inaugural budget aimed at stimulating C$500 billion in investment over the next five years. These measures include enhanced tax deductions to encourage investments in machinery, equipment, and new technologies.
Additionally, Statistics Canada reported a narrowing of the current account deficit to C$9.7 billion in Q3 2025, down from C$21.6 billion in the previous quarter. This improvement was driven by a reduction in the goods trade deficit, increased investment income, and a stronger performance in services trade.
Criticism and Opposition
Despite the government's initiatives, there are concerns regarding the effectiveness of these measures. Critics argue that the rollback of climate regulations, particularly in Alberta, may undermine long-term sustainability goals while prioritizing short-term economic gains. The agreement to support the construction of a new oil pipeline to the west coast has also faced opposition from environmental groups, who argue that it contradicts commitments to reduce carbon emissions.
What's Next
Looking ahead, the Canadian government will likely continue to monitor FDI trends closely and may adjust its strategies to enhance investment attractiveness. The outcomes of the recent agreements with the United Arab Emirates, which secured C$70 billion in investments targeting energy, AI logistics, and mining, will also be pivotal in shaping future economic policies.
