International Investment Position of Czech republic and Poland

International Investment Position of

Poland and the Czech Republic

Elkoumy/ Reinkemeier -Poland/Czech Republic 125.02.2009

Fakultät Wirtschaftswissenschaften

Lehrstuhl für Wachstums- und Konjunkturtheorie

Prof. Dr. Thomas Gries

Sherif Elkoumy and Johanna Reinkemeier

Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland

Prof. Dr. Thomas GriesProf. Dr. Thomas Gries

Agenda

• Stylized Facts

• International Investment Position of Czech Republic


•IIP of Poland

•Conclusion• International Investment Position of Poland

• Conclusion


International Investment Position of Poland and Czech Republic

Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland

Czech Republic Poland

Population 10 million 38 million

GDP $175bn $420bn


•IIP of Poland

•Conclusion

GDP $175bn $420bn

Average real

GDP growth

rate 2003-08

4.3% 4.4%

Currency koruna zloty

EU membership: Since 01/2004



Inflation Rates of Poland and the Czech Republic

0

1020

30

40

1994

1996

1998

2000

2002

2004

2006

2008

YearIn

fla

tio

n r

ate

(%

)

Czech Republic

Poland

Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland


•IIP of Poland

•Conclusion ü high inflation rates of Poland in the 80s and 90s

Ł revaluation with factor 1:10,000 in 1995

ü Afterwards stabilization thanks to strict monetary

policy of the Polish central bank

ü Czech koruna has been one of the most stable

currencies in Central and Eastern Europe

Ł Aims to adopt Euro in 2011 (Poland) and 2012

(Czech R.)



Net International Investment Positions of Poland and the Czech

Republic 1993-2008 (stocks in millions of USD)

Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland


•IIP of Poland

•Conclusion

Ł Czech Republic and Poland are both debtor nations


Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland

International Investment Position of the Czech Republic


40000

60000

80000

100000

120000

140000

160000

180000

200000

IIP Total Assets:

(Millions of USD)

IIP Total Liabilities:

(millions of Us$)


•IIP of Poland

•Conclusion0

20000

1993 1995 1997 1999 2001 2003 2005 2007

Ł Domestic liabilities increase at a faster pace than domestic

assets


Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland


100%

Structure of the investment position assets and liabilities:

• IIP deficit of $68,600m in 2008 (37.8% of GDP)

• Deficit mainly due to FDI into the Czech economy

• High share of foreign portfolio investment assets in Czech

Republic


•IIP of Poland

•Conclusion

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Assets Liabilities

Other

Government

Czech National Bank

Commercial Banks

Portfolio Investment

Foreign Direct

Investment


Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland


Development of Direct Investment

0

20000

40000

60000

80000

100000

120000

Czech FDI Stocks

Abroad: (millions of

USD)

FDI Stocks in Czech

Republic (millions of

USD)


•IIP of Poland

•Conclusion

0

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Development of Portfolio Investment

0

5000

10000

15000

20000

25000

30000

35000

40000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007


Assets (millions of

USD)


Liab (millions of

USD)


Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland


Accumulation of Reserves

• official reserve assets: $34,922m (12/2008)

Stock of Foreign Reserves in the Czech Republic (millions of USD)

10000

1500020000

2500030000

3500040000


•IIP of Poland

•Conclusion0

500010000

Ł Czech Republic accumulates foreign reserves to

maintain the koruna´s undervaluation

(estimations: +15%)


Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland


Balance of Payments

-4000

-2000

0

2000

4000

6000

8000

10000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Current Account

in millions of

Us$ /flows

Balance on

Goods &

Services in


•IIP of Poland

•Conclusion -8000

-6000

-4000 Services in

millions of Us$

Ł Current account deficits due to huge income

deficits


International Investment Position of Poland

Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland

• IIP of Poland recorded an increse in deficit for the last 15 years

• Net foreign acquisition of financial assets in Poland exceeds net

Poland acquisitions of financial assets abroad


•IIP of Poland

•Conclusion



Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland

• Net Position recorded net Liabilities of around 242 B.$ at yearend 2007, compared with 166 B.$ at yearend 2006

•The deficit represented 43.8% of GDP at yearend 2007 compared with 33% at yearend 2006.


•IIP of Poland

•Conclusion



Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland

• Direct Investment

ü DI Assets and Liabilities increased for the four consecutive years.

ü High share of Direct Investment in reporting economy (liabilities) . about 31% of GDP


•IIP of Poland

•Conclusion



Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland

• Direct Investment

üNet Position of Direct Investment recorded net Liabilities, an increase in deficit of about 156 B.$ at yearend 2007,compared with 111 B.$ at yearend 2006. üRelative high interest rate in average 5%ü Increasing equity/shares capital and reinvested earnings .


•IIP of Poland

•Conclusion



Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland

• Portfolio Investment

ü The observable rise in Liabilities is due to rising acquisitions of domestic equity and debt securities and Purchases the bonds and notes issued by the Gov.

üBonds and notes represented 70% of PI Liabilities.


•IIP of Poland

•Conclusion



Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland

• Portfolio Investment (Net Position)

ü recorded net liabilities, an increase in deficit about 83 B.$ at yearend 2007,compared with 70 B.$ at yearend 2006.ü The deficit represented 15% of GDP.


•IIP of Poland

•Conclusion



Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland

• Financial Derivatives

ü Net Liabilities, an increase in deficit of about 292 m.$ at yearend 2007, compared with 68 m.$ at yearend 2006.

üDerivatives Markets were established in the period 2003-2004. an observable increase in lequidity of interest rate and FX derivatives traded on OTC.


•IIP of Poland

•Conclusion



Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland

• Other Investment

ü Net Liabilities of about 67 B.$ at yearend 2007, due to increasing Loans which represented 70% of OI liabilities and Trade credits.


•IIP of Poland

•Conclusion



Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland

• Reserve Assets

üNet Assets 65 B.$ at yearend 2007 (Compare Czech Republic: 35 B. $), to meet the country´s BOP needs.

ü Foreign exchange represented 83% of total Reserve Assets due to continously incresing in Export.


•IIP of Poland

•Conclusion


Conclusion

Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland

ü IIP deficit mainly due to FDI into the Czech economy and the Polish economy.

ü High share of foreign portfolio investment assets in Czech Republic, conversely high share of foreign portfolio Investment liabilities in Poland.

ü The deficit in IIP of Poland represented 43.8% of GDP, and 34.4% of GDP in the Czech R.


•IIP of Poland

•Conclusion

34.4% of GDP in the Czech R.


Agenda:

•Stylized Facts

•IIP of Czech

Republic

•IIP of Poland Thank you for your attention!


•IIP of Poland

•Conclusion

Thank you for your attention!

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International Investment Position of Czech republic and Poland

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