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BMO Previews This Week's Q1 Current Account Balance in Canada

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Canada will release its Q1 current account balance on Thursday, said Bank of Montreal (BMO).

The country's international trade flows experienced a reversal of fortune of sorts in Q1, noted the bank. The first couple of months reflected ongoing uncertainty regarding the United States relationship, highlighted by the start of formal CUSMA trade renegotiation discussions.

However, the late-February outbreak of the Iran war resulted in the closure of the Strait of Hormuz, driving prices for key Canadian exports, especially energy, higher. On cue, the merchandise trade deficit flipped to surplus in March and looks to continue benefiting as long as activity through the Strait remains restricted, stated BMO.

Still, the Q1 shortfall likely widened due to softness in earlier months. Meantime, the services account posted a small deficit following a surplus in the previous quarter.

Consequently, BMO estimates the current account shortfall to deteriorate to $2.5 billion in Q1 from $700 million in Q4 2025. That would weigh in at a modest 0.3% of GDP, with the latter figure to be released the following day, ahead of an expected surplus in Q2.

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