Balance of payments – commentary

2024 Q4

Simultaneously with the publication of the 2024 Q4 balance of payments figures, revised data for 2023 and 2024 Q1–Q3 are being published. The revised data mainly take into account updated CZSO data on exports and imports of goods and services and, on the financial account, data from statements submitted to the CNB by financial and non-financial entities, including the annual sample survey of foreign direct investment in the Czech Republic and domestic direct investment abroad.

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The current account ended 2024 Q4 in a surplus of CZK 35.3 billion. The financial account recorded an outflow of funds (net lending) of CZK 74.1 billion owing to higher growth in external assets than external liabilities. The CNB’s reserve assets rose by CZK 15.2 billion (adjusted for valuation and price differences). The current account surplus was 1.8% of GDP on an annual basis, and the goods and services surplus was 6.5% of GDP.

Current account

Ratio of Current Account and Goods and Services Balance to GDP
(CZK billions, right-hand scale in %)

Note: Indicators calculated on the basis of annual moving aggregates

The goods and services balance recorded a surplus of CZK 109 billion in Q4. The balance improved by CZK 3.4 billion year on year at current prices. The goods balance ended in a surplus of CZK 95.9 billion, up by CZK 6 billion on a year earlier. The services balance also showed a surplus of CZK 13 billion, representing a year-on-year decrease in the surplus of CZK 2.7 billion. This was due mainly to a year-on-year decline in exports of services associated with the processing of goods (manufacturing services on physical inputs owned by others) and a year-on-year increase in imports of charges for the use of intellectual property. There was also a year-on-year decline in exports and a year-on-year increase in imports of reinsurance services. Foreign travel recorded a surplus amid a year-on-year increase in exported and imported tourism services. The total goods and services turnover at current prices was up by 5.7% year on year in Q4, amid a rise in exports of CZK 76.2 billion and in imports of CZK 72.8 billion.

The primary income deficit was CZK 54.3 billion in Q4. Its year-on-year decrease of CZK 38.7 billion was due mainly to lower dividends paid abroad on direct and portfolio investment and a decline in the share of earnings reinvested by non-residents in domestic firms. Dividends paid abroad amounted to CZK 45.1 billion, representing a year-on-year decrease of CZK 15.6 billion.

Secondary income ended Q4 in a deficit of CZK 19.4 billion (a year-on-year deterioration of CZK 13.1 billion). The widening of the deficit was due to a rise in the deficit on net income from the EU budget recorded in the secondary income balance and a worse balance of labour costs in connection with the employment of non-residents in the Czech Republic and Czech residents abroad (payments of taxes, social security contributions and social benefits). 

The capital account

The capital account ended Q4 in a surplus of CZK 69.2 billion. The year-on-year increase in the surplus of CZK 47.6 billion was due to a combination of higher income related to cross-border trading in emission allowances (non-produced non-financial assets) and higher income from the EU budget recorded in the capital account.

The financial account

The financial account (including the change in the CNB’s reserve assets) recorded a net outflow (net lending) of CZK 74.1 billion in Q4 owing to external assets increasing more markedly than external liabilities.

Ratio of Financial Account to GDP
(CZK billions, right-hand scale in %)

Note: Indicators calculated on the basis of annual moving aggregates

Foreign direct investment saw a net outflow of funds totalling CZK 4 billion. Asset transactions included a higher share of earnings reinvested by domestic owners, an increase in equity capital in foreign firms and a rise in loans provided to foreign firms. The main factors on the liability side were an increase in the share of earnings reinvested by foreign owners in domestic subsidiaries and intragroup borrowing from foreign companies.

Portfolio investment recorded a net inflow of CZK 163.8 billion. This was due mainly to purchases of domestic bank bonds and, to a lesser extent, ownership interests by foreign investors. This represented an increase in liabilities of CZK 182.6 billion. Assets simultaneously increased by CZK 18.8 billion due to an increase in foreign ownership interests and bonds held by domestic non-bank investors.

Derivatives trading recorded a net inflow totalling CZK 19.3 billion.

Other investment saw an outflow (net lending) of CZK 238 billion.

This outcome was significantly affected by a net outflow of CZK 118.6 billion in trade credits and advances of other sectors (non-financial corporations, financial institutions other than banks, and households).

The foreign exchange position of the banking sector (including the CNB) recorded repayment of part of short-term foreign deposits accepted and the provision of long-term loans abroad. The net outflow of funds was CZK 106.6 billion.

The external position of general government recorded a net outflow of CZK 12.9 billion due to higher provision of long-term loans abroad than borrowing from abroad.

The CNB’s own transactions and transactions for CNB clients resulted in an increase in reserve assets of CZK 15.2 billion (adjusted for valuation differences).