The Czech Republic’s international investment position and external debt

as of 30 September 2020

Revised data as of the end of 2020 Q2 are being published simultaneously with the Czech Republic’s international investment position and external debt figures as of 30 September 2020. The revised data reflect updated CNB data from statements submitted by financial and non-financial entities.

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In 2020 Q3, the Czech Republic’s international investment position (the balance of its financial assets and liabilities in respect of non-residents) recorded a decrease in deficit of CZK 170.6 billion to CZK 655.4 billion at the end of September. The deficit dropped by CZK 445.8 billion in year-on-year terms and represented 11.6% of GDP at current prices. The Czech Republic’s external debt amounted to CZK 4,389.4 billion at the end of Q3 (i.e. 77.6% of GDP). It recorded a year-on-year decrease of CZK 57.3 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 149.2 billion to CZK 7,597.3 billion in Q3. The assets went up by CZK 434.6 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 56.5% of total investment position assets, of which the CNB’s reserve assets and other assets accounted for 48.3%.

The external assets of the corporate sector rose in Q3 due to growth in the volume of earnings reinvested by domestic firms in subsidies and the provision of loans to foreign affiliates. The corporate sector’s external assets accounted for 31% of total investment position assets.

Residents’ holdings of foreign securities rose to 10.1% of total investment position assets due to purchases of foreign shares and bonds by domestic investors.

The positive fair value of derivatives represented 1.9% of investment position assets.

The external assets of the government sector were unchanged in Q3, accounting for 0.5% of total assets.

Investment position external liabilities fell in Q3 by CZK 21.3 billion to CZK 8,252.7 billion at the end of September. In year-on-year terms, liabilities fell by CZK 11.3 billion.

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

Structure of investment position liabilities

Direct investment liabilities edged up in Q3, accounting for 55.1% of total external liabilities. Ownership interests in domestic companies increased due to reinvestment of earnings by foreign owners.

A decline in the stock of portfolio investment liabilities abroad was affected in Q3 by a decrease in the volume of domestic government bonds held by non-residents. Portfolio investment accounted for 19.4% of total liabilities.  

The negative fair value of derivatives represented 2.1% of total liabilities.

The Czech Republic’s external debt (the sum of its liabilities with stipulated maturity) fell by CZK 11.1 billion in Q3, totalling CZK 4,389.4 billion at the end of September. In year-on-year terms, the debt decreased by CZK 57.3 billion. As regards the time structure of the external debt, the share of liabilities with original maturities longer than one year was 45% of total debt liabilities.

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

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

Turning to the sectoral breakdown of the external debt, the determining factor in Q3 was a decrease in the debt of the government and banking sectors (including CNB liabilities).  The government sector recorded a decline in external debt in connection with a drop in government bonds held by non-residents and repayment of loans. The government sector’s liabilities accounted for 18.8% of the total external debt.

The decrease in the external debt of the banking sector reflected repayments of short-term liabilities. The banking sector’s debt accounted for 38.6% of the total debt at the end of September.

The external debt of other sectors increased due to the drawing of corporate loans not associated with direct investment. The external liabilities of other sectors accounted for 42.6% of the total debt.

Turning to the breakdown of the external debt by instrument, deposits and bonds are the most frequently used forms of debt financing (together accounting for 52.5% of the 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 74% of the total external debt. Public sector liabilities accounted for the rest (26%). 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