Bloomberg News

Koruna Weakens as Czech Current-Account Gap Widens on Dividends

October 13, 2011

Oct. 13 (Bloomberg) -- The koruna weakened against the euro after a report showed the Czech current-account deficit widened more than analysts estimated in August as companies sent dividends to their foreign owners.

The Czech currency slid 0.5 percent to 24.769 per euro at 5:22 p.m. in Prague, paring this year’s gains to 1 percent.

The gap expanded to 33.65 billion koruna ($1.87 billion) from a shortfall of 12.8 billion koruna in July, as companies repatriated 39 billion koruna in dividend payments in August, the Czech central bank said today. The median estimate of nine analysts polled by Bloomberg was for a 16 billion-koruna deficit.

“Foreign investors are now reinvesting only about a fourth of their profits in the Czech economy and transferring the rest back home,” Tomas Vlk, an analyst at Patria Finance in Prague, wrote in an e-mailed report today. “This unfavorable development is a result of cautiousness as the economic outlook is worsening.”

The deficit, the widest since July 2010, also included a negative balance of 4.1 billion koruna for direct investment as foreign owners reduced capital of Czech units and companies provided loans to their owners abroad, the Czech National Bank said on its website. Foreign trade posted a shortfall of 4.2 billion koruna, according to the bank’s figures.

“The enormously high current-account gap and the reported structure of the overall balance of payments will likely weaken the Czech currency,” Miroslav Frayer, an economist at Komercni Banka AS in Prague, wrote in a report to clients today. “The August balance-of-payments figure was a big disappointment.”

--With assistance from Andras Gergely in Budapest. Editors: Linda Shen, Alex Nicholson

To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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