Canada’s current account balance with the rest of the world was in deficit in the fourth quarter of 2007 for the first time since the second quarter of 1999, Statistics Canada reported today.

The difference between what Canada buys and what it sells to the rest of the world deteriorated $1.8 billion from the previous quarter to negative $513 million.

“A lower goods surplus, and record travel deficit, contributed significantly to the emergence of this small deficit,” StatsCan said.

For 2007 as a whole, the current account surplus narrowed to $14.2 billion, down sharply from the 2006 surplus of $23.6 billion.

The Canadian dollar’s strong gains against major foreign currencies — particularly the U.S. dollar and the UK pound — made Canada’s exports more expensive and its imports cheaper.

The goods surplus narrowed to $9.3 billion in the fourth quarter, below the $10 billion mark for the first time this decade, as exports fell more than imports.

Nevertheless, the $1.1 billion reduction in the goods surplus was smaller than that of the previous quarter when imports advanced.

Goods exports weakened further in the fourth quarter, down $4 billion from the previous quarter to $111.4 billion, the third straight drop in sales of goods to non-residents. The largest decline was in industrial goods which fell $1.8 billion, mostly due to lower prices.