Canada's trove of overseas assets, including airports and roads owned by pension funds, is helping to protect the country's top credit rating, according to Fitch Ratings.
Foreign assets held by Canadians reached C$4.96 billion ($3.71 billion) at the end of 2018, exceeding foreign liabilities by C$528.6 billion and making the country a net creditor to the rest of the world.
That's helping to support the credit rating, despite a mountain of public-sector debt and persistent current account deficits that would typically undermine a nation's creditworthiness, Fitch said. The current account includes trade in goods and services, as well as net earnings on cross-border investments and transfer payments.
"Countries that run current account deficits are countries that tend to pull the rating down," said James McCormack, Fitch's global head of sovereign and supranational group. Nonetheless,"Canada is building more external assets than external liabilities."
Canada historically had been a debtor nation, with net liabilities peaking at C$333 billion in 2011, according to Statistics Canada. But since then, the country has seen the value of its foreign assets more than double, helped in part by a weaker Canadian dollar. That outpaced a 72% increase in liabilities. The nation turned from debtor to creditor in 2014.
The C$2.2 trillion economy is supporting public sector debt — provincial and federal — equivalent to almost 90% of its output, compared with an average of about 40% for the 11 countries rated AAA by Fitch. Top-rated countries have on average been reporting current account surpluses while Canada has posted deficits of about 2 percentage points to almost 4 percentage points of gross domestic product in the last decade.