External imbalance of the Czech economy mirrors the fact that external demand declines quicker than the domestic one. However, dividend outflow and reinvested earnings were lower that a year ago. Thus, the C/A deficit in December 2008 was almost the same as in December 2007. Preliminary monthly figures suggest that the C/A gap widened to CZK 111bn (3.0% GDP) in 2008 from CZK 89bn (2.5% GDP) in 2007. The trade balance turned to negative figures in the last three months of the year dragging the whole-year surplus below the 2007 level. On the other hand, the Czech economy must pay for previous FDI inflow. Dividends paid abroad increased by 34% to CZK 156bn in 2008 from CZK 117bn in 2007. The C/A gap was sufficiently covered by a surplus of the financial account (CZK 171bn) in 2008 thanks to FDI inflow (CZK 183bn). Most of FDI came from reinvested earnings (two thirds), while new investment contributed one third. Negative outlook for the trade balance, scarcity of sources for FDI flows and possibly higher dividend outflow are likely to burden the C/A this year. Our forecast suggest widening of the gap to CZK 150bn (4% GDP).