Hungary's Q1 current account improves to EUR 787mn surplus, FDI negative.

By bne IntelliNews July 1, 2011
Hungary's current account generated a surplus of EUR 787mn in Q1, improving from an EUR 604mn surplus for the same period of the previous year, the National Bank of Hungary (NBH) reported. Expectedly, foreign trade was the main driving force behind the favourable development, since all other sub-articles deteriorated on the year. It posted a surplus of EUR 2.2bn for the period, widening by 19.97% y/y. The foreign goods trade surplus improved by 43% on the year to EUR 1.79bn, while the surplus of services trade shrank by 27.45% y/y to EUR 444mn for the period. The lower services surplus was also based on weaker export of foreign tourism services. At the same time, the increase in both export and import of other services, which includes transport, indicated a recovery of world markets and more intense external trade. The balance of net current income deteriorated by 13.4% y/y to an EUR 1.39bn deficit for the quarter. Its worsening was aggravated by a higher deficit on current transfers, which climbed by 62.2% y/y to EUR 60mn. Meanwhile, FDIs in the country were negative by EUR 34mn during the quarter, resulting from a substantial outflow in other capital. The portfolio investment attracted by Hungary, however, almost doubled y/y in Q1 and offset the negative developments in the other articles of the financial account. As a result, the external position of the country improved to a net financing capacity of EUR 1.3bn in Q1, pointing to a market reduction of its external vulnerability. Still, gross external debt remained relatively high at EUR 109.7bn at the end of the period, rising by 0.3% y/y on account of higher government borrowing to finance the budget deficit.

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