Balance of payments – commentary

2021 Q4

Simultaneously with the publication of the 2021 Q4 balance of payments figures, revised data for the previous quarters of 2020 and 2021 are being published. The revised data mainly reflect the results of the CNB’s annual survey of foreign direct investment for 2020 and updated CZSO figures on exports and imports of goods and services.

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The current account ended 2021 Q4 in a deficit of CZK 53.7 billion. The financial account recorded an inflow of funds (net lending) of CZK 30.6 billion owing mainly to growth in external assets. Reserve assets increased by CZK 123 billion (adjusted for valuation differences). The current account deficit was 0.8% of GDP and the goods and services surplus was 3% of GDP on an annual basis.

The current account

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

Ratio of Current Account and Goods and Services Balance to GDP
Note: Indicators calculated on the basis of annual moving aggregates

The goods and services balance recorded a deficit of CZK 2.9 billion in Q4. The balance deteriorated by CZK 122.4 billion year on year due to increased goods imports and flat exports. The goods balance ran a deficit of CZK 28 billion in Q4. The services balance showed a surplus of CZK 25.1 billion, which represents a year-on-year improvement of CZK 14.3 billion. Turning to the structure of the services balance, telecommunication services, research services and advisory services recorded year-on-year growth, and the foreign travel balance also improved. The total goods and services turnover at current prices was up by 7.7% year on year in Q4, amid growth in exports and imports of CZK 22.2 billion and CZK 144.6 billion respectively.

The primary income deficit was CZK 47.3 billion in Q4. The year-on-year decrease in the deficit of CZK 88.4 billion was due to an improvement in the direct investment income balance, mainly as a result of a drop in dividends paid to foreign owners. Dividends on direct and portfolio investment paid abroad amounted to CZK 24.2 billion, a year-on-year decrease of CZK 96.2 billion.

Secondary income ended Q4 in a deficit of CZK 3.6 billion, up by CZK 2.6 billion on a year earlier. The increase in the deficit was due mainly to a decrease in net income from the EU budget recorded under secondary income.

The capital account

The capital account ended Q4 in a surplus of CZK 34.6 billion. The year-on-year increase in the surplus of CZK 23.1 billion was due mainly to a surplus on trading in emission permits and growth in net 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 inflow (net borrowing) of CZK 30.6 billion in Q4 owing to external liabilities rising faster than external assets.

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

Ratio of Financial Account to GDP
Note: Indicators calculated on the basis of annual moving aggregates

Foreign direct investment recorded a net outflow of CZK 4.3 billion. The main factor on the asset side was the provision of loans to foreign affiliated companies by domestic corporations and equity capital increases in foreign companies, including reinvestment of earnings by domestic owners.

Portfolio investment saw a net inflow (net borrowing) of CZK 145.9 billion. An increase in holdings of short-term bonds of commercial banks by foreign investors was linked with optimisation of banks’ balance sheet structures at the end of the year in accordance with regulatory requirements (the Resolution Fund). These operations and government bond purchases by foreign investors led to an increase in liabilities of CZK 183.6 billion, while assets rose by CZK 37.7 billion as a result of purchases of foreign shares by domestic investors.

Derivatives trading recorded an inflow of CZK 26 billion.

Other investment saw an outflow (net lending) of CZK 14.2 billion.

The main item affecting other investment was a change in the short-term international position of the banking sector, which recorded a net outflow (including the CNB and excluding reserve assets) of CZK 32.6 billion.

The government sector drew on foreign loans and recorded a net inflow of CZK 13.5 billion.

The corporate sector saw a net inflow of CZK 4.9 billion.

A surplus on transactions for CNB clients resulted in an increase in reserve assets of CZK 123 billion (adjusted for valuation differences).