In December, the current account surprised with a deficit of CZK22.1bn. The higher dividend outflow, which doubled in comparison with November, stood behind the result. The trade balance also showed a lower surplus in comparison with the previous months. On the other hand, the balance of transfers from the EU budget to the Czech Republic was positive this time.
The current account printed a deficit of CZK22.1bn as the dividend outflow jumped from CZK13.4bn in November to CZK27.8bn in December. The balance of payments from the Czech Republic into the EU budget reached a surplus of CZK1.1bn. The primary income balance thus recorded a deficit of CZK27.5bn. The secondary income balance printed a negative balance of CZK3.8bn. The result did not rescue the trade balance of goods and services this time, either. While it is true it showed a surplus of CZK9.2bn, this is substantially less that we have seen in recent months.
The financial account saw an outflow of capital amounting to CZK2.1bn when FDI reported an inflow of CZK3.4bn (with CZK5.8bn in reinvested earnings). FX reserves (adjusted for exchange rate changes) increased just CZK12.4bn in December.
Despite December’s poor result, the all-year current account balance reached a record high of CZK73bn after CZK41bn seen in 2015. The trade balance, which reached a surplus of CZK354bn, was particularly behind the excellent result. This year, however, we expect the current account surplus to reach just less than half of 2016’s level. The lower surplus on the balance of services, higher dividend playouts and lower inflows from EU funds are likely to be the main reasons. Nevertheless, the external position of the Czech economy still remains strong, which will create upward pressure on the Czech crown even after the end of the FX intervention regime.