Balance of payments – commentary

2023 Q4

Simultaneously with the publication of the 2023 Q4 balance of payments figures, revised data for the previous quarters of 2023 and 2022 are being published. The revised data mainly reflect the results of the annual survey of foreign direct investment for 2022 and updated CZSO data on exports and imports of goods and services and, on the financial account, an update of data from statements submitted to the CNB by financial and non-financial entities.

xxx

The current account ended 2023 Q4 in a surplus of CZK 12 billion. The financial account recorded an outflow of funds (net lending) of CZK 47.2 billion owing to higher growth in foreign assets than foreign liabilities. The CNB’s reserve assets increased by CZK 75.2 billion (adjusted for valuation differences). The current account surplus was 0.4% of GDP on an annual basis and the goods and services surplus was 5.2% of GDP.

The current account

Ratio of Current Account and Goods and Services Balance to GDP
(CZK billions, right-hand scale in %)

Note: Indicators calculated on the basis of annual moving aggregates

The goods and services balance recorded a surplus of CZK 106 billion in Q4. The balance improved by CZK 102.9 billion year on year at current prices due to a significant decrease in goods imports (index 91.4) in contrast to a stagnation of exports (index 99.6). The goods balance thus ended in a surplus of CZK 90 billion (a year-on-year improvement of CZK 91.9 billion). The services balance also showed a surplus of CZK 16 billion, a year-on-year increase of CZK 11 billion. This increase was due mainly to a drop in imports of transport services and an improvement in trade in research and development services. By contrast, foreign travel showed a deficit due to higher domestic demand amid a year-on-year increase in exported and imported tourism services. The total goods and services turnover at current prices was down by 2.7% year on year in Q4, amid a rise in exports of CZK 14.4 billion and a decline in imports of CZK 88.5 billion.

The primary income deficit was CZK 90.4 billion in Q4. Its year-on-year increase of CZK 23.6 billion was due mainly to a rise in the share of foreign owners in reinvested earnings in domestic subsidiaries. Dividends on direct and portfolio investment paid abroad amounted to CZK 55.6 billion, a year-on-year increase of CZK 1.1 billion.

Secondary income ended Q4 in a deficit of CZK 3.7 billion, up by CZK 2.9 billion on a year earlier. The increase in the deficit was due to a decrease in net income from the EU budget recorded in the secondary income balance.

The capital account

The capital account ended Q4 in a surplus of CZK 21.6 billion. The year-on-year rise in the surplus of CZK 14.9 billion was due to higher income from the EU budget recorded on the capital account.

The financial account

The financial account (including the change in the CNB’s reserve assets) recorded a net outflow (net lending abroad) of CZK 47.2 billion in Q4 owing to external assets increasing more markedly than external liabilities.

Ratio of Financial Account to GDP
(CZK billions, right-hand scale in %)

Note: Indicators calculated on the basis of annual moving aggregates

Foreign direct investment saw a net inflow of funds totalling CZK 9.1 billion. The main factor on the liabilities side was growth in the share of foreign owners in reinvested earnings in domestic firms. In addition to a rise in the share of earnings reinvested by domestic owners in foreign subsidiaries, asset operations consisted of purchases of foreign shares.

Portfolio investment recorded a net outflow (net lending) of CZK 130.3 billion. This was related to a decline in holdings of domestic bank and government bonds by foreign investors, which meant a drop in liabilities of CZK 109.9 billion. Assets rose by CZK 20.5 billion as a result of purchases of foreign securities by residents.

Derivatives trading recorded an inflow totalling CZK 5.2 billion.

Other investment saw an inflow (net borrowing) of CZK 144 billion.

This was due predominantly to the foreign exchange position of the banking sector (including the CNB), which recorded a rise in deposits from abroad. The net inflow was CZK 169.2 billion.

The external position of general government recorded a net outflow of CZK 23.2 billion, due mainly to repayment of short-term loans abroad.

As regards other sectors, a rise in short-term assets abroad was the determining factor. The net outflow of funds abroad was CZK 2 billion.

The CNB’s own transactions and transactions for CNB clients resulted in an increase in reserve assets of CZK 75.2 billion (adjusted for valuation differences).