Balance of payments – commentary

2021 Q3

The current account ended 2021 Q3 in a deficit of CZK 76.7 billion. The financial account recorded an inflow of funds (net borrowing) of CZK 69.2 billion. Reserve assets increased by CZK 117.1 billion (adjusted for valuation differences). The current account surplus declined to 0.6% of GDP and the goods and services surplus was 5.2% 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 was almost balanced (a surplus of CZK 0.3 billion) in Q3. The surplus was down by CZK 108.9 billion year on year due to imports rising faster than exports. The services surplus was flat year on year (down by CZK 0.3 billion). The structure of the services balance recorded a decline in the transport services surplus, while the balance of the international movement of persons went from surplus to deficit. Exports of other services rose mainly for telecommunications services, research services and advisory services. The total goods and services turnover at current prices grew by 9.2% year on year in Q3 amid an increase in exports and imports of CZK 32.7 billion and CZK 141.6 billion respectively.

The primary income deficit was CZK 68.8 billion in Q3. The year-on-year increase in the deficit of CZK 54 billion was due to the direct investment income balance as a result of growth in dividends paid abroad and reinvested earnings. Dividends on direct and portfolio investment paid out abroad amounted to CZK 65.9 billion, increasing by CZK 34.9 billion year on year.

The secondary income balance recorded a deficit of CZK 8.1 billion in Q3, an improvement of CZK 1.6 billion on a year earlier. The decrease in the deficit was due mainly to a rise in net income from the EU budget recorded under secondary income.

The capital account

The capital account ended Q3 in a surplus of CZK 38 billion. The annual increase in the surplus of CZK 19.6 billion was due mainly to drawdown of CZK 23.2 billion in the form of a grant allocation from the EU’s Recovery and Resilience Facility[1] for the Czech Republic’s national recovery and resilience plan.

The financial account

The financial account (including the change in the CNB’s reserve assets) recorded a net inflow (net borrowing) of CZK 69.2 billion in Q3 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

Under foreign direct investment, a net inflow of CZK 13.4 billion was recorded. The main factor on the liabilities side was reinvestment of earnings by foreign owners in domestic subsidiaries and loans drawn from affiliated corporations.

Portfolio investment saw a net outflow (net lending) of CZK 106.6 billion. On the asset side, domestic investors purchased foreign shares and the assets rose by CZK 22 billion. On the liabilities side, foreign investors reduced holdings of government and bank bonds, which resulted in a decline in liabilities of CZK 84.6 billion.

Derivatives trading recorded an inflow of CZK 22.6 billion.

Other investment saw an inflow of funds from abroad (net borrowing) of CZK 256.8 billion.

This is due largely to a change in the short-term position of banks due to an increase in deposits and loans from abroad. The net inflow (including the CNB and excluding reserve assets) was CZK 257.6 billion. The inflow of other capital was affected, among other things, by the general SDR allocation approved by the IMF Board of Governors on 2 August 2021. The amount allocated in line with the Czech Republic’s quota in the IMF is SDR 2.1 billion, or CZK 64.4 billion.

As a decline in short-term assets prevailed over the repayment of financial loans and trade credits in the corporate sector, a net inflow of funds was recorded, amounting to CZK 1.7 billion.

The government sector made repayments of loans drawn in the past and recorded a net outflow of CZK 2.5 billion.

A surplus on transactions for CNB clients resulted in an increase in reserve assets of CZK 117.1 billion (adjusted for valuation differences). The increase in international reserves also reflected the general SDR allocation.


[1] The funds from the Recovery and Resilience Facility are part of the NextGenerationEU (NGEU) financial programme, approved by the European Council in December 2020. The NGEU allows the Commission to borrow from capital markets on behalf of EU Member States. These additional funds of the Commission will be distributed to Member States in the form of grants and loans to restore the economies hit by the Covid-19 pandemic.