The current account continued with a negative balance in July, which amounted to CZK27.4bn since the dividend outflow from Czech companies to their foreign owners went on (CZK38.2bn). The negative balance was partly mitigated by a surplus of external trade, which recorded a positive balance of CZK12.9bn.
July’s current account increased its negative balance to CZK-27.4bn. The deficit is due to the continuing dividend season. The dividend outflow recorded CZK28.2bn, which kept the primary income balance deficit at a level of CZK35.7bn. The trade balance printed a surplus of only CZK12.9bn. The amount (when exports and imports declined) was influenced by the company-wide holidays in a large part of the manufacturing industry. Within the current account, CZK0.1bn was transferred from the EU budget to the Czech Republic. On top of that, the capital account recorded a net transfer of EU funds of CZK6.7bn. The cumulative current account balance for the last twelve months continues to signal a very good external position of the Czech economy when the surplus is around CZK45bn.
The financial account in July showed a capital inflow of CZK22.5bn. Foreign direct investment amounted to CZK23bn, of which CZK8.9bn were reinvested earnings. In the cumulative aggregate over the past twelve months, the inflow of foreign investment continues to decline. It grew significantly during the first quarter, but since then has weakened and, in addition, strong results from last year are being gradually removed from the cumulative number.
The active trade balance should continue to grow. The good economic situation of Germany and the entire euro area will stimulate the demand for Czech exports. They will maintain a strong growth rate in the future. Increased investment activity supporting imports, will thus not reduce net exports excessively in this situation. We expect the current account balance to reach a surplus of CZK43.4bn this year. This year’s shifted dividend season continued in August and probably even in September. This puts pressure on the depreciation of the koruna, which is compensated by the pressure for a stronger exchange rate resulting from the surplus of the trade balance and probably constant interest of investors speculating on the further strengthening of the Czech currency. The balance of these forces currently maintains the koruna’s exchange rate at around EUR/CZK26.09.