The Czech Republic’s international investment position and external debt

as of 31 March 2020

Simultaneously with the publication of figures as of 31 March 2020, revised data since 2015 are being published. In cooperation with the Czech Statistical Office, the Czech National Bank has prepared a revision of the Czech Republic's balance of payments and international investment position. The published data are aligned with the revision of the national accounts and financial accounts. This is a regular exceptional revision of data (a so-called benchmark revision), which is coordinated by Eurostat and the European Central Bank with the countries of the EU. It is a different type of data revision than the routine data revision carried out each year, as it involves the revision of a longer time series. The purpose of the revision of a longer time series is to incorporate new data sources and calculations of new variables. It will result in data on the Czech Republic's balance of payments and international investment position in a time series starting in 2015. The data will be more consistent with international standards in the area of statistics on external economic relations.

It is a routine revision as national accounts, financial accounts, balances of payments and international investment positions require regular updates. The European Union has decided to carry out these more extensive data revisions in a coordinated manner every five years. The scope of the current data revision is much smaller than that in 2014 when new national accounts (ESA210) and balance of payments manuals were introduced. Consistency in the data for national accounts and balance of payments statistics and the international investment position is one of the priorities in the revision of a time series. As regards the investment position, data are corrected on the financial account in order to align the adjustments in national accounts in the external sector (e.g. based on a recommendation by Eurostat, government assets, insurance technical provisions have been corrected, and data for employee stock options have been included in financial derivatives).

The overall trends in international investment position of the Czech Republic remain preserved. 

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In 2020 Q1, the Czech Republic's international investment position (the balance of its financial assets and liabilities with respect to non-residents) recorded an increase in deficit of CZK 378.7 billion to CZK 788 billion at the end of March. The deficit dropped by CZK 363.6 billion in year-on-year terms and represented 13.9% of GDP at current prices. The Czech Republic's external debt amounted to CZK 4,495.4 billion at the end of Q1 (i.e. 79.2% of GDP). It recorded a year-on-year increase of CZK 103.5 billion. 

Chart 1 – International investment position
(CZK billions, end-of-period balance)

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

External assets increased by CZK 595.2 billion to CZK 7,656.2 billion in Q1. The assets went up by CZK 713.2 billion year on year. 

Chart 2 – Structure of investment position assets
(CZK billions, end-of-period balance)

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

The external assets of the banking sector (including the CNB, excluding portfolio investment and derivatives) accounted for 56.3% of total investment position assets, of which the CNB's reserve assets and other assets accounted for 47.5%.

The increase in the corporate sector's external assets in Q1 was due mainly to a rise in equity capital and loans in corporations associated with direct investment. The corporate sector's external assets (including direct investment) accounted for 31% of total investment position assets.

Residents' holdings of foreign securities accounted for 9% of total investment position assets.

The positive fair value of derivatives represented 3.2% of investment position assets.

The external assets of the government sector were little changed in Q1, accounting for 0.5% of total assets.

Investment position external liabilities rose by CZK 216.6 billion to CZK 8,444.2 billion in Q1. The year-on-year increase in liabilities of CZK 349.6 billion was due mainly to an increase in liabilities arising from direct investment. 

Chart 3 – Structure of investment position liabilities
(CZK billions, end-of-period balance)

Structure of investment position liabilities

Direct investment liabilities increased due mainly to an increase in loans accepted from associates and a rise in equity capital in domestic subsidiaries. Foreign direct investment liabilities accounted for 53.7% of total international investment position liabilities.

Despite purchases of domestic debt securities by non-residents, the decline in portfolio investment liabilities abroad in Q1 was due mainly to negative price changes in equity securities. Portfolio investment accounted for 18.3% of total liabilities.

The negative fair value of derivatives represented 3.2% of total liabilities.

The Czech Republic's external debt (the sum of its liabilities with stipulated maturity) rose by CZK 112.1 billion in Q1, totalling CZK 4,495.4 billion at the end of March. In year-on-year terms, the debt increased by CZK 103.5 billion. As regards the time structure of the external debt, the share of liabilities with original maturities longer than one year was 42.7% of total debt liabilities. 

Chart 4 – External debt by debtor
(CZK billions, end-of-period balance) < p>External debt by debtor (CZK billions, end-of-period balance)

Turning to the sectoral breakdown of the external debt, Q4 saw an increase in government debt due to a rise in holdings of government bonds by non-residents and due to the drawdown of foreign loans. The government sector's liabilities accounted for 17.3% of the total external debt.

The external debt of other sectors also increased due to the drawing of loans and the sale of corporate bonds. Other sectors' external liabilities accounted for 41.6% of the total debt.

The banking sector (including CNB liabilities) recorded a decline in debt due to a decrease in the volume of bank bond holdings by foreign investors. The banking sector's debt accounted for 41.1% of the total debt at the end of March.

Turning to the breakdown of the external debt by instrument, deposits and bonds are the most frequently used form of debt financing, accounting for 53.1% of the total external debt.

Chart 5 – External debt by instrument
(CZK billions, end-of-period balance)

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

The external debt of the private sector accounted for 75.5% of the total external debt. Public sector liabilities accounted for the rest (24.5%). They comprise liabilities of the government, liabilities of private entities guaranteed by the government and liabilities of entities majority-owned by the state.

Chart 6 – External debt of public and private sectors
(CZK billions, end-of-period balance)

External debt of public and private sectors