Investment trends in Canada have not been good for some time. This weakness might stem from a variety of factors, including rising uncertainty about the Canadian trade backdrop and more restrictive domestic policy measures in sectors that supply intermediate inputs to other businesses and final products to consumers (such as energy, plastics, financial services and telecommunications). Slower innovation, less competition and lower investment might also impede productivity gains, ultimately constraining overall economic growth.

As for inflows of foreign capital, a more positive picture emerged this year as FDI grew more broadly across the economy and the number and value of investments in Canada increased. However, it is likely that the US tax reforms of 2017 lowered investment in Canada relative to other OECD countries.

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Sustainable projects accounted for a large share of the increase in FDI flows to Canada, as they are expected to drive higher long-term returns. In addition, reinvestment and acquisitions accounted for more than half of the total investment volume, highlighting the importance of the business climate for Canadian companies in attracting foreign investments.

In addition to these more positive trends, the Government accelerated the modernization of the Investment Canada Act (ICA) in fiscal year 2023-24, which may help ensure that we can take prompt and strong action to protect our national interests when needed. The ICA reforms will enhance Canada’s visibility on investments and support greater transparency, as well as give the Government the necessary tools to respond quickly and forcefully where needed.