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The dividend season is slowly coming to an end

Company: Komerční banka, a.s.

The Czech current account recorded a deficit gain in August, the third in a row. Even in the second summer holiday month, the outflow of dividends continued, but it was less than half as much as in July. This year's dividend season will be nearing its end. For the rest of the year, the current account will be rolled back into the black. The year-on-year positive current account of the balance of payments will justify the trend of Czech koruna appreciation.

The current account significantly reduced its negative balance in August as the deficit reached CZK8.1bn after July's CZK27.4bn. The negative balance is the result of the continuation of the dividend season; the outflow reached CZK17.5bn and holds the balance of primary incomes in a deep deficit of CZK26.2bn. Just a month ago, the deficit was almost CZK10bn deeper. Traditionally the balance of foreign trade in goods and services records a surplus; in August, it amounted to CZK22.3bn. A year ago, the surplus was CZK1bn higher. The foreign trade balance is starting to reflect strong domestic demand resulting in higher volumes of imported goods, which is also why the overall positive 12-month current account balance is declining slightly this year. However, the external position of the Czech economy remains solid.

The financial account showed an outflow of CZK10.4bn in August. Foreign direct investment recorded an outflow of CZK18.3bn. According to the CNB, the FDI figure was affected by the provision of loans abroad within a direct investor’s group. The reinvested earnings balance amounted to CZK8.9bn in August. In the cumulative aggregate over the past 12 months, the inflow of foreign investment continues to decline. It grew significantly during the first quarter but since then has weakened and, in addition, last year’s strong results are gradually being removed from the cumulative number.

The trade balance will keep its huge surplus, but the current trend of gradual surplus reduction will continue. The good economic situation in Germany and the entire euro area will continue to stimulate demand for Czech exports, which will maintain a strong growth rate in the future. On the other hand, increased investment activity and strong household consumption will encourage imports. The current account balance should therefore reach a surplus of CZK43.4bn this year.

Tags: Finance |

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