After $1 trillion exodus, Canada finds itself ‘back on the capital radar’
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Canada is re-emerging as a prime destination for global investment after years of capital flight, with a new report arguing the country has a $1.8 trillion opportunity over the next decade to become the fastest-growing economy in the G7.
The RBC Thought Leadership report, Capital Gains: How Canada can unlock the $1.8 trillion it needs for growth, said foreign direct investment into Canada reached nearly $100 billion last year, the most since 2015 and the first time in a decade when inflow exceeded outflow.
“Canada is back on the capital radar,” the report said.
The findings come as global investors reassess where to deploy money amid rising geopolitical tensions and supply-chain uncertainty. RBC said disruptions abroad, including conflict in Iran and growing strategic competition among major powers, are prompting companies and sovereign investors to seek more stable jurisdictions.
Canada, the report said, has many of the qualities investors are seeking: a deep talent pool, abundant natural resources, political stability, and the rule of law.
The report identifies six industries where concentrated investment could transform Canada’s economic trajectory:
Oil and Gas: $705 billion
Electricity: $670 billion
Agriculture and Food Processing: $205 billion
Metals and Minerals: $200 billion
Defence: $19 billion
Space: $12 billion
The report said coordinated policy reforms and aggressive investment could create “a new and prosperous Canada.”
That future, the report said, could include two new oil pipelines, a major expansion of electricity generation including nuclear power, a transformed mining sector, and “sovereign launch capability just as space becomes the next economic frontier.”
Decade long capital recession
The optimistic outlook follows what RBC described as a “10-year capital recession.”
“Over the past decade, Canada’s net outflow of investment exceeded $1 trillion, the most significant capital exodus in modern Canadian history,” the report said. “For every dollar invested in Canada from abroad, two dollars exited.”
Canada also ranks last among G7 nations in investment in machinery, equipment and intellectual property, according to the report.
The result has been sluggish productivity growth and stagnating living standards. Despite the weak investment record, RBC said Canada is not short of available funds.
“Canada does not lack capital, but the systems to deploy it are maladapted to the new age,” the report said.
The country’s non-financial corporate sector alone holds more than $1 trillion in cash and liquid assets, while Canadian pension funds and asset managers control trillions more. Instead, the report said the real barriers are “execution, predictability, and risk tolerance.”
Investors flee when rules are vague
It called for governments to streamline permitting, reduce regulatory uncertainty, reward entrepreneurship, and provide investors with clearer rules.
“Investors are adept at navigating risk but flee when hemmed in by vague rules and shifting frameworks,” the report said.
RBC also said Indigenous economic partnerships must be central to major project development. The report said partnerships are most effective when “embedded early and aligned with community needs,” adding they can help secure approvals and accelerate timelines.
“But this great opportunity won’t last,” the report said. “In an era of intensified competition, capital will flow to countries that make investments viable.”
