Dividend Outflow to Foreign Countries Surges in the Czech Republic

A massive capital outflow continues from the Czech Republic. From January to September, dividends and interest worth 294 billion crowns were paid to foreign countries, according to preliminary data from the Czech National Bank (CNB). This represents an increase of three percent from the previous year.

In the last year, dividends and interest from foreign direct investments that flowed abroad amounted to 331 billion crowns. “The profits of foreign-owned companies practically stagnated until September, reaching just under 400 billion crowns. The rate of reinvested profits in this period slightly declined from 28 percent to 27 percent, thus approaching the level common between the financial crisis and the pandemic from 2010 to 2019,” said Jiří Pour, an analyst at UniCredit Bank.

Banks are currently leading the charge with record dividend payouts. By the end of August, they had already sent nearly 76 billion crowns to their foreign parents. This is just four billion more than the total for last year. The overall figure of 294 billion for January to September includes dividends and the interests domestic companies pay their foreign owners. However, it does not have data on bank interest payments.

The six largest domestic banks, which will pay a tax on extraordinary profits this year, earned 57.1 billion crowns in the first three quarters. In the same period last year, it was 1.3 billion crowns more.

Banks will remain among the main winners of the energy and price crisis as they profit mainly from high-interest rates. In addition, they managed to dampen the impact on their business within the changes that the consolidation package and the third pension pillar adjustment brought. The government eventually left state support for building savings, without which the product would be doomed to extinction, only halved it.