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The inflow of capital into the economy accelerated in all channels in February

Company: Komerční banka, a.s.

The current account balance recorded a surplus in February of CZK28.2bn. This result was supported by the surplus of the balance of goods and services amounting to CZK31.6bn. The balance of portfolio investments stood at CZK67bn and was influenced by the growth of investments of non-residents into government bonds denominated in CZK.


The current account balance showed a surplus of CZK28.2bn in February, which was supported mainly by the positive balance of goods and services amounting to CZK31.6bn. The Czech Republic also received CZK2.1bn more from the EU budget in February. The overall balance of primary and secondary income showed a deficit of CZK3.2bn.

The financial account recorded a positive balance at the level of CZK26.4bn in February. The capital inflow was due to portfolio investments (CZK67bn), which was influenced by growth of investments by foreign investors in government bonds denominated in CZK. A more significant influence on other investments was recorded due to a change in the position of the banking sector (CZK132bn). Hence, the CNB increased foreign exchange reserves by CZK223.6bn in February, of which interventions were CZK220bn.

Compared with portfolio investments, the FDI balance reported a surplus. The amount of the surplus amounted to CZK0.3bn. The capital outflow from the Czech economy was mainly due to an increase in debt by residents. Net reinvestment of earnings reached CZK8.3bn in February, and even equity investments increased CZK9.1bn. The total accumulated deficit (inflow) in direct investment over the past 12 months climbed to a record level of CZK164bn.

We expect the current account surplus for the whole year is set to reach CZK44bn, which is about CZK18bn weaker than last year. The reduced deficit reflects the expected lower negative balance of income, which accounts for the expected outflow of capital after exchange rate commitment scrappage. In spite of that, the external position of the Czech Republic will remain favourable as the positive balance of goods and services is expected to deteriorate only slightly. The current account surplus is set to push for the strengthening of the Czech koruna. However, the behaviour of investors and their expectations will have a greater influence on the exchange rate in the future.

Tags: Economics | Finance |

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