as of 31 December 2011

Simultaneously with the publication of the Czech Republic’s international investment position and external debt as of 30 December 2011, the CNB is publishing revised data for the previous quarters of 2011 and 2010. The revisions mainly reflect the inclusion of the results of the CNB’s annual FDI survey for 2010 and updates of the financial assets and liabilities of the international banking, corporate and government positions.

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In 2011 Q4, the Czech Republic’s international investment position (i.e. the balance of its financial assets and liabilities in respect of non-residents) recorded a decline in deficit of CZK 41.6 billion to CZK 1,895.1 billion compared to the previous quarter. The deficit decreased to 49.7% of GDP at current prices. In year-on-year comparison, the deficit was CZK 64.7 billion higher. The Czech Republic’s external debt recorded a year-on-year increase of CZK 106 billion to CZK 1,872.6 billion (49.2% of GDP).

International investment position
(CZK billions, end-of-period balance)
 

Financial assets increased by CZK 122 billion compared to the end of the previous quarter, to CZK 2,565.3 billion, mainly because of growth in the CNB’s international reserves and the corporate assets of domestic direct investors. In year-on-year comparison, this means a rise of CZK 142.4 billion.

Structure of investment position assets
(CZK billions, end-of-period balance)

The external assets of the banking sector, including the CNB, increased in Q2, especially in the CNB international reserves item. The rise was due to a surplus on balance of payments transactions (client operations and income on funds deposited abroad) and also to exchange rate effects caused by the koruna’s depreciation against the basket of reserve currencies. Commercial banks recorded a decline in external assets due to repayments of deposits and loans provided abroad. The CNB’s external assets accounted for 31.8% of total investment position assets. The share of commercial banks’ assets (excluding securities) was 18.5%.

The rise in external assets of the corporate sector was related to a rise in direct investment abroad and wider provision of export loans to foreign partners. The rise in domestic direct investment abroad reflected growth in the estimated share of domestic owners in reinvested earnings, financial loans provided to foreign subsidiaries and repayments of loans drawn in the past.¹ Assets were also favourably affected by valuation and price changes. The corporate sector’s assets, including direct investment, accounted for 25.2% of total assets.

The increase in portfolio investment held by domestic entities was due to valuation and price changes. Sales of foreign shares and bonds by domestic banks and non-banks dominated foreign securities transactions. Portfolio investment accounted for 17.6% of total assets.

The positive fair value of derivatives accounted for 5.8% of total investment position assets.

The volume of the foreign assets of the government sector is the least significant, accounting for only 1.1% of total financial assets.

Investment position external liabilities rose by CZK 80.4 billion to CZK 4,460.4 billion in Q4. The year-on-year increase of CZK 207 billion was due mainly to growth in foreign investment liabilities and other liabilities of the corporate sector.

Structure of investment position liabilities
(CZK billions, end-of-period balance)

Foreign direct investment liabilities in the Czech Republic accounted for 56% of total investment position liabilities. Their increase in Q4 was associated mainly with estimated reinvested earnings and an inflow of funds under credit relationships between affiliated companies (primarily repayments of loans provided in the past¹ ).

Portfolio investment also recorded an increase in liabilities due to purchases of short-term government bonds and shares of domestic non-financial corporations by foreign investors. The share of portfolio investment in total investment increased to 17.9% (of which equity securities accounted for 4.2%).

The negative fair value of derivatives accounted for 3% of total liabilities.

The Czech Republic’s external debt (the sum of its liabilities with stipulated maturity) rose by CZK 43.8 billion in Q4 to CZK 1,872.6 billion. The rise of CZK 106 billion compared to the end of 2010 was due chiefly to an increase in short-term liabilities of the corporate sector. External liabilities with an (original) maturity of more than one year accounted for 70.5% of total debt.

External debt by debtor
(CZK billions, end-of-period balance)

The growth in external debt in Q4 was due mainly to liabilities of the corporate sector, which accounted for 49.7% of investment position liabilities. Their increase was due to growth in import credits, credit relationships between corporations in the group of a direct investor, and valuation changes.

The rise in external debt of the government sector was due to an increase in holdings of short-term government bonds by foreign investors and the drawdown of an EIB loan for infrastructure development. The government sector’s external debt represented 25.3% of debt liabilities.

A decline in external debt was visible in the banking sector, due mainly to repayments of short-term deposits and long-term loans accepted from foreign investors. The external liabilities of the banking sector, including the CNB, accounted for 25% of the total external debt.

As regards the breakdown by instrument, the increase in external debt was reflected mainly in a rise in the share of trade credits and inter-company loans at the expense of deposits and other liabilities. External debt is dominated by liabilities in the form of issued bonds and accepted foreign loans (61.2%).

External debt by instrument
(CZK billions, end-of-period balance)

The private sector’s share in the long-term external debt was 48%. The remaining 52% fell to public sector liabilities, which include liabilities of, or guaranteed by, the government, liabilities of private entities guaranteed by the government and liabilities of entities majority-owned by the state with maturities longer than one year.

Long-term external debt of public and private sectors
(CZK billions, end-of-period balance)

Repayments of principal and interest on debt service according to the stock of long-term liabilities as of 31 December 2011 for 2012 amounted to CZK 235.5 billion (CZK 171.5 billion of which was principal). They are expected to decline in 2013, mainly because of lower repayments of government bonds due this year.

Debt service on medium- and long-term external debt liabilities as of 30 June 2011
(CZK billions)

Note:
¹⁾ At present, according to the fifth edition of the IMF’s Balance of Payments Manual, “net reporting” of loans for direct investment is applied, where the provision of a loan through direct investment in the Czech Republic to a foreign parent company or subsidiary is shown as a decline in the liabilities of domestic subsidiaries. A rise in receivables from abroad still (in the statistics) decreases the volume of liabilities received. According to the sixth Balance of Payments Manual currently under preparation, these transactions will be reported separately. The ECB now also requires separate reporting of these items in some assessment reports.