Canada's Current Account Remains Under Pressure Despite High Energy Prices, says BMO

09:52 AM EDT, 05/28/2026 (MT Newswires) -- Canada's current account deficit widened to $7.2 billion, or $28.7 billion a.r., in Q1, following a shortfall of $1.0 billion, or $4.0 billion a.r., in Q4 2025, noted Bank of Montreal after Thursday's data.

This amounts to an estimated 0.9% GDP, in line with recent norms, BMO said, while noting the latest GDP data will be released Friday.

A wider goods trade deficit has driven the deterioration amid significant tariff uncertainty, said the bank. However, the late-February outbreak of the Iran war marked a shift in trade flows by driving up prices for key Canadian exports, especially energy, in March, it added.

According to BMO, high oil prices will continue to support merchandise exports through Q2.

Meantime, an improvement in the services trade surplus was driven by commercial -- largely from an increase in financial services exports -- and travel services, BMO said. The latter was helped by an ongoing decline in Canadian travel to the United States, while spending in other destinations remains sturdy, it added.

The primary income account shifted to a deficit on a much smaller investment income surplus. The surplus in direct investment shrank as profits earned by international investors in Canada outpaced those earned by Canadian investors abroad, BMO noted.

The secondary income account -- which had been in deficit since 2016 -- improved to a balanced position on a surge in Canadian tax receipts, it also noted.

Among other highlights, foreign direct investment (FDI) into Canada slipped to $22.0 billion in Q1, largely directed to energy and mining, BMO said. Meantime, domestic companies' direct investment abroad jumped to $39.2 billion. That resulted in a net FDI outflow of $17.2 billion, the third outflow in the past four quarters, it added

While the energy price shock will support Canadian trade flows over the short term, the current account remains under pressure as long as significant trade and tariff uncertainty persists, according to BMO.

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