Hungary's Q2 CA expands to EUR 738mn surplus, FDI still negative.

By bne IntelliNews October 4, 2011
Hungary's current account generated a surplus of EUR 738mn in Q2, doubling from a EUR 371mn surplus for the same period of the previous year, the National Bank of Hungary (NBH) reported. The surplus in H1 stood at EUR1.12bn, improving from EUR 628mn in 2010. The improvement in Q2 came on favourable dynamics in real economic transactions, while all other sub-articles deteriorated. Expectedly, foreign trade recorded the highest positive value with a EUR 1.2bn surplus for the period, widening by 33.15% y/y. The exports improved by 13.03% on the year to EUR 19.2bn, outstripping imports which were up by 11.9% y/y to EUR 17.97mn for the period. On the negative side, with the slow-down in exports growth the trade surplus deteriorated by 9.2% q/q. At the same time the positive contribution of the services sector increased, as net services doubled on the quarter and climbed by 52.95% on the year to EUR 1.14bn in Q2. The higher services surplus was based on better revenues, while expenditures remained practically unchanged. Specifically, strong improvement was observed in air transport services and all trade-related activities, while tourism performance remained stable. The net current income deteriorated by 15.99% y/y to a deficit of EUR 1.726bn for the quarter. After posting a revised EUR 76mn deficit in Q1, current transfers balance recovered to a EUR 106mn surplus in April-June, but the value still remained below the last year's level. Meanwhile, FDI in the country were negative by EUR 609mn during the quarter, compared to a downside revised minus EUR 144mn in Q1 and minus EUR 1.2 a year ago. The portfolio investment attracted by Hungary, including the state external financing, reached EUR 1.82bn 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 1.1bn in Q2 and EUR 1.9bn in January-June, pointing to a market reduction of its external vulnerability. Still, gross external debt remained relatively high climbing to EUR 110.9bn as at end-June, rising by 1.0% y/y on account of higher government borrowing to finance the budget deficit.
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