Hungary recorded a trade surplus of €755mn in May, statistics office KSH reported on July 8.
Although the surplus decreased by €234mn compared to April’s balance, it remains hefty; it sits €284mn above that seen a year previously. Strong exports helped Hungary's trade balance improve by 29% across 2015, to hit a record high of €8.1bn for the full year. The ongoing trend is boosting the government's efforts to reduce Hungary's vulnerability to external shocks.
After 18 months of increase, exports dropped 3.5% y/y in March, however, they returned to growth in April, and the increase continued in May, pushing to 6.3%. After a 10-month rising streak, imports decreased 3.2% in March. The decline continued in April at a rate of 1.9%, but May saw a return to growth with an increase of 2.4%.
At the same time, the continued large surplus will likely add to appreciation pressures on the forint, which the Magyar Nemzeti Bank (MNB) has been struggling to diffuse, albeit that has faded post-Brexit. Rate setters delivered a three-month monetary easing cycle, to leave the benchmark rate at 0.9% on May 26. Although the MNB said that it aims to maintain the benchmark rate at the current level - and it did so at the latest rate setting meeting on June 21 - the monetary board has also pointed to the possible return of unconventional policy tools.