1. International Investment Position of
Poland and the Czech Republic
Fakultät Wirtschaftswissenschaften
Lehrstuhl für Wachstums- und Konjunkturtheorie
Prof. Dr. Thomas Gries
Sherif Elkoumy and Johanna Reinkemeier
Elkoumy/ Reinkemeier -Poland/25.02.2009 Czech Republic 1

2. Prof. DDrr.. TThhoommaass GGrriieess
Agenda:
•Stylized Facts
•IIP of Czech
Republic
•IIP of Poland
Agenda
• Stylized Facts
• International Investment Position of Czech Republic
•Conclusion
• International Investment Position of Poland
• Conclusion
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 2

3. Prof. DDrr.. TThhoommaass GGrriieess
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
•Conclusion
Average real
GDP growth
rate 2003-08
4.3% 4.4%
Currency koruna zloty
EU membership: Since 01/2004
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 3

4. Prof. DDrr.. TThhoommaass GGrriieess
International Investment Position of Poland and Czech Republic
Inflation Rates of Poland and the Czech Republic
40
30
20
10
0
1994
1996
1998
2000
2002
2004
2006
2008
Year
Inflation rate (%)
Czech Republic
Poland
Agenda:
•Stylized Facts
•IIP of Czech
Republic
•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.)
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 4

5. Prof. DDrr.. TThhoommaass GGrriieess
International Investment Position of Poland and Czech Republic
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
•Conclusion
Ł Czech Republic and Poland are both debtor nations
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 5

6. Prof. DDrr.. TThhoommaass GGrriieess
Agenda:
•Stylized Facts
•IIP of Czech
Republic
•IIP of Poland
International Investment Position of the Czech Republic
International Investment Position of the Czech Republic
200000
180000
160000
140000
120000
100000
80000
60000
40000
IIP Total Assets:
(Millions of USD)
IIP Total Liabilities:
(millions of Us$)
•Conclusion
20000
0
1993 1995 1997 1999 2001 2003 2005 2007
Ł Domestic liabilities increase at a faster pace than domestic
assets
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 6

7. Prof. DDrr.. TThhoommaass GGrriieess
Agenda:
•Stylized Facts
•IIP of Czech
Republic
•IIP of Poland
International Investment Position of the Czech Republic
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
100%
•Conclusion
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Assets Liabilities
Other
Government
Czech National Bank
Commercial Banks
Portfolio Investment
Foreign Direct
Investment
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 7

8. Prof. DDrr.. TThhoommaass GGrriieess
Agenda:
•Stylized Facts
•IIP of Czech
Republic
•IIP of Poland
International Investment Position of the Czech Republic
Development of Direct Investment
120000
100000
80000
60000
40000
20000
0
Czech FDI Stocks
Abroad: (millions of
USD)
FDI Stocks in Czech
Republic (millions of
USD)
•Conclusion
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Development of Portfolio Investment
40000
35000
30000
25000
20000
15000
10000
5000
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Portfolio Investment
Assets (millions of
USD)
Portfolio Investment
Liab (millions of
USD)
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 8

9. Prof. DDrr.. TThhoommaass GGrriieess
Agenda:
•Stylized Facts
•IIP of Czech
Republic
•IIP of Poland
International Investment Position of the Czech Republic
Accumulation of Reserves
• official reserve assets: $34,922m (12/2008)
Stock of Foreign Reserves in the Czech Republic (millions of USD)
40000
35000
30000
25000
20000
15000
10000
•Conclusion
5000
0
Ł Czech Republic accumulates foreign reserves to
maintain the koruna´s undervaluation
(estimations: +15%)
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 9

10. Prof. DDrr.. TThhoommaass GGrriieess
Agenda:
•Stylized Facts
•IIP of Czech
Republic
•IIP of Poland
International Investment Position of the Czech Republic
Balance of Payments
10000
8000
6000
4000
2000
0
-2000
-4000
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
-6000
•Conclusion -8000
millions of Us$
Ł Current account deficits due to huge income
deficits
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 10

11. Prof. DDrr.. TThhoommaass GGrriieess
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
•Conclusion
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 11

12. Prof. DDrr.. TThhoommaass GGrriieess
International Investment Position of Poland
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.
•Conclusion
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 12

13. Prof. DDrr.. TThhoommaass GGrriieess
International Investment Position of Poland
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
•Conclusion
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 13

14. Prof. DDrr.. TThhoommaass GGrriieess
International Investment Position of Poland
Agenda:
•Stylized Facts
•IIP of Czech
Republic
•IIP of Poland
• Direct Investment
ü Net 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.
ü Relative high interest rate in average 5%
ü Increasing equity/shares capital and reinvested earnings .
•Conclusion
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 14

15. Prof. DDrr.. TThhoommaass GGrriieess
International Investment Position of Poland
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.
ü Bonds and notes represented 70% of PI Liabilities.
•Conclusion
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 15

16. Prof. DDrr.. TThhoommaass GGrriieess
International Investment Position of Poland
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.
•Conclusion
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 16

17. Prof. DDrr.. TThhoommaass GGrriieess
International Investment Position of Poland
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.
ü Derivatives Markets were established in the period 2003-
2004. an observable increase in lequidity of interest rate and
FX derivatives traded on OTC.
•Conclusion
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 17

18. Prof. DDrr.. TThhoommaass GGrriieess
International Investment Position of Poland
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.
•Conclusion
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 18

19. Prof. DDrr.. TThhoommaass GGrriieess
International Investment Position of Poland
Agenda:
•Stylized Facts
•IIP of Czech
Republic
•IIP of Poland
• Reserve Assets
ü Net 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.
•Conclusion
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 19

20. Prof. DDrr.. TThhoommaass GGrriieess
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.
•Conclusion
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 20

21. Prof. DDrr.. TThhoommaass GGrriieess
Agenda:
•Stylized Facts
•IIP of Czech
Republic
•IIP of Poland
Thank you for your attention!
•Conclusion
25.02.2009 Elkoumy/ Reinkemeier -Poland/Czech Republic 21