1) Balance of payments surplus continues to grow in the first three quarters
2) Current account surplus ends
3) Balance of trade runs a deficit
4) Net inflow of resources to capital account continues to increase
5) Credits drawn by Czech firms abroad continue to rise
6) Portfolio investment share in net capital inflow increases
7) Direct investment inflow continues
8) Direct investments of Czech firms abroad increase
9) Significant decline in official institutions´ share of resources
10) Balance of payments´ favourable development reflected in foreign exchange increase
1) The continuous growth in the balance of payments surplus in convertible currencies is more and more affected by the net foreign capital inflow, while growth in the current account surplus is slowing. Credits directly drawn by Czech firms from foreign subjects and portfolio investments hold the leading position in the foreign capital inflow. Their growth is stimulated by the improved assessment of the CR's investment and the relatively high differential between domestic and foreign interest rates with the foreign exchange rate of the Czech crown remaining stable.
2) The growing surplus of the service balance, amounting to CZK 25.7 bn (USD 885 mil.) during the monitored period, is the main source of the current account surplus of CZK 19.1 bn (USD 657 mil.) in the first nine months. Receipts from international travel which exceeded expenditures by CZK 17.9 bn (USD 615 mil.) make up the commanding share of this current account surplus. The second largest source of receipts is transport with a surplus of CZK 11.6 bn (USD 397).
3) While in the first half of the year the balance of trade ran a surplus of CZK 1.9 bn, in Q3 it shifted to a deficit of CZK 4.9 bn (USD 170 mil.). This change was reflected in a halt to the growth of the current account surplus. The increasing income balance deficit caused by interest payments on the expanding volume of credits drawn abroad and the volume of yields from securities remitted to foreign countries contributed to this situation.
4) The growth in the net foreign capital inflow on the capital account continued also in Q3 amounting to CZK 33.1 bn (USD 1,139 mil.), an increase of CZK 10 bn. The gross capital inflow totaled CZK 93.1 bn (an outflow of CZK 60.0 bn). Credits drawn by Czech firms abroad and portfolio investments were the most widely used forms of gross capital inflow. Of this inflow 92% comprises long-term resources, which can be assessed positively from the point of view of the future performance of the Czech economy.
5) The net capital inflow in the form of foreign credits drawn by domestic firms reached CZK 26.5 bn (USD 911 mil.) for the period January to September, of which roughly CZK 10 bn in Q3. Most credits were drawn from Great Britain (38%), Austria (24%), and Germany (14%) and were used mainly for investments (39%), purchase and reconstruction of real estate (33%) and operational costs (24%). The share of short-term credits up to one year is negligible, most credits coming due in more than five years.
6) Portfolio investments in the period under review amounted to CZK 21.8 bn (USD 750 mil.), representing 66% of the net capital inflow. The balance of purchases and sales of Czech securities by foreign investors comprises more than half of this amount. At close-September foreign investors held securities worth CZK 23.9 bn (65% shares, 19% enterprise bonds and 16% state bonds). The largest number of securities is owned by investors from Great Britain, USA and Germany. Most capital was invested in energy, finance and state bonds. Only approximately 35% of portfolio investments is motivated by the interest rate differential between domestic and foreign interest rates. Portfolio investments also include an issue of City of Prague bonds worth USD 250 mil.
7) The inflow of direct foreign investments to the CR amounted to CZK 13.9 bn (USD 478 mil.) between January to September this year, and stood at CZK 75.4 bn (USD 2.7 bn) as of September 30, 1994. Compared to the same period last year, this year's figures on capital inflow in the form of direct foreign investments are moderately higher. Capital inflow for Q3 alone representing USD 178 mil., show a slight increase in foreign investor interest in this form of investment. The slow pace of direct foreign investments in the CR is connected to increased demand for quality in investment intentions and with the clarification of ownership relations within the ongoing privatization process.
Investments this year were directed particularly towards the banking and insurance systems, and construction and foodstuff industries. In terms of the origin of the inflow of direct foreign investment, the leading position is held by Germany followed by Austria, France, USA and Great Britain. As of 30.09.94, no changes have taken place in the overall ranking of the strongest investor countries, which has remained virtually unchanged since 1992.
8) The volume of Czech direct investments abroad (excluding the SR) totaled CZK 1.7 bn (USD 58 mil.) in the monitored period, CZK 411 mil. more than in the comparable period in 1993. Capital exports were predominantly directed towards the service sphere, to the support of exports and ensuring imports. Investments in production abroad have so far been minimal.
9) As a result of the overall favorable development of the balance of payments in convertible currencies, IMF credits worth USD 1.1 bn were paid ahead of schedule. The Czech Republic thereby ceased being in a debtor position vis-a-vis the IMF. Of official sources, the CNB has drawn only USD 8 mil. out of the total EIB loan worth ECU 57 mil. provided to the CR, which is to finance projects involving small and middle-sized enterprises.
10) CNB foreign exchange reserves have increased by USD 1,545 mil. since the beginning of the year, thus totaling USD 5,417 mil. as of 30.09.94 which could cover more than four months of imports of goods and services in convertible currencies. Since the foreign exchange reserves of commercial banks throughout the period under review more or less stagnated, reserves of the entire banking system rose by USD 1,559 mil. to USD 7,804 mil.