Analyst view - Hungary April C/A deficit EUR 1.07 billion

1 2 ›

In light of poor trade deficit figures published last Thursday (EUR 1,530.5 million in January-April) today’s C/A data has not caused much of a surprise, Vojnits said.

However, the deficit of over EUR 1 billion is considered extremely high and unsustainable in the medium run, he added.

Vojnits also said he saw no significant improvement in the structure of deficit financing, adding that while expenditure was high and growing, income was not growing considerably.
The analysts said that while foreign direct investments were to increase in the rest of the year, tourism figures were to show a decline.

Current account data clearly show, Vojnits said, the dominance of trade deficit, which is largely caused by a significant rise in investment-oriented imports. However, if EU-related inventory stockpiling were in fact to blame for the trade gap, as the Central Statistics Office (KSH) claimed it was, the next trade balance data (to come out early in July) should already show considerable improvement, the analysts added.

Vojnits said its was plausible that the April figures would spur the central bank to raise its 2004 current account deficit forecast of 7.8% of GDP (EUR 6.3 billion). Currently, the 12-month accumulated deficit corresponds to around 9%-9.5% of GDP, which is an exceptionally high ratio, he said.

As recent macroeconomic data (foreign trade, inflation, C/A) could undermine market confidence, the forint might ease even in the long run, Vojnits said, adding that the national currency could drop to around 255.00 versus the euro.

Vojnits also said the central bank might decide to cut interest rates even when the forint is weaker, adding that the NBH would take inflation prospects rather than the forint’s movements into consideration when deciding on rate moves.
It is possible that the central bank will reduce rates even at a weaker forint, but it is unlikely to happen before the end of the summer, he added.

• Tags:
• economy