Economy
INSTANT VIEW - Hungary BOP report signals massive adjustment
Mariann Trippon, CIB Bank, Budapest
“Q1 current account figures came as a positive surprise, the current account posted EUR 0.591 bln deficit sharply down from the EUR 2.583 bln shortfall int he same period of 2008, and lower than the 1.25 bln market consensus. The result was better than our 1.1 bln projection as well. The trade balance (goods and services) registered a surplus of EUR 822 mln, while the income balance narrowed from minus 2.1 bln to minus 1.413 bln. The improvement in the trade balance came as no surprise, but the lower deficit in the income balance was not entirely expected."
“The net external financing position of Hungary improved quite significantly, the financing need actually disappeared, partly reflecting the improvement in the trade balance and partly as a result of higher EU transfers. The net external financing capacity of Hungary moved into positive territory for the first time since 1995 confirming that the external position of the country is going to improve significantly this year and the next. The seasonally adjusted quarterly external financing need was EUR 1.078 bln or 4.8% of the GDP that is a 1.8% improvement compared to the same period of 2008. After the better than expected Q1 figures we will likely revise down our FY forecast, the FY C/A deficit might be around 4% of the GDP -down from 8.4% in 2008."
Zsolt Papp, KBC, London
"Hungary's current account deficit amounted to EUR 591m, much less than the expected EUR 1.5bn. The current account plus the capital account even posted a surplus of EUR 272m. According to the National Bank of Hungary (NBH) this is the first surplus since 1995! Main reasons are the trade surplus (due to the collapse in imports) and EU transfers."
"The financial market has already responded positively: EUR-HUF down to 273 from 275. Coupled with yesterday's story that Hungary could emerge a "fiscal champion" from this recession (which in our view is questionable) this could generate enough momentum to carry the equity market higher in the days ahead.
"Hungary's fundamental problems, however, are still the same. The economy is suffering from the most severe recession of all new EU members, the government has no room to ease fiscal policy, monetary policy has been tightened since the beginning of this year and elections in April 2010 imply considerable policy uncertainty. In short, not a screeming buy in our opinion. But, as mentioned above, newsflow seems good enough to push the Hungarian markets up."
Gergely Suppan, Takarékbank, Budapest
"Hungarian C/A deficit fell to EUR 591m in Q1 from 2583m in Q4 and from 1651m a year ago. As expected goods and services balance improved remarkable as imports fell more than exports, income deficit fell noticeable as corporate profits dropped and foreign investors sold government bonds already in the previous quarter. Current transfers have been improved by EU transfers. Moreover, capital account balance also benefited from EU transfers which showed a surplus of EUR 863m. Thus, Hungary reached an external financing ability of EUR 272m instead of huge financing need from abroad in the last decade. Net FDI was EUR 159m which resulted in a net creditor position of the Hungarian economy. We expect a similar improvement of C/A throughout 2009 as domestic demand falls considerable, Forint weakness increased competitiveness of Hungarian products and services, corporate profits are falling, and Hungary could rely on increasing EU transfers. Thus, we expect that cumulative current and capital account will fall below 2% of GDP which seems to be easy covered by even a lower net FDI inflow. C/A deficit is expected to narrow to EUR 4bn in 2009 from 8.9bn in the previous year."
Timothy Ash, Royal Bank of Scotland, London
“The NBH just released BOP data for Q1 which showed a marked improvement both YOY and on the consensus in the current account deficit."
"Net-net the data should be supportive of the HUF, easing concern over the external financing requirement; albeit note that the capital account is still underpinned by official financing. The hope will presumably be that if the government manages to keep reform momentum on track, portfolio flows will begin to recover; portfolio outflows totalled €6.1bn for the half year to March - equivalent to around 7% of GDP."
Orsolya Nyeste, Erste Bank, Budapest
“C/A deficit amounted to EUR 591mn in 1Q09, remaining well below our expectation of EUR 1.1-1.2bn. Please note that the C/A deficit was EUR 2.583bn in the last quarter of 2008, thus the improvement that has taken place during a quarter was close to EUR 2bn, indicating a spectacular adjustment in the external balance of the Hungarian economy."
“The surplus on the trade balance amounted to EUR 685mn in January-March, while that on the services balance was EUR 137mn. The deficit on incomes - which is traditionally high in Hungary - showed an improvement of EUR 637mn in 1Q, compared to the previous quarter. The reasons could have been on one hand lower profit taking of multinational firms - as their overall profit may have been lower, due to the ongoing recession. On the other hand, interest payment obligations decreased as well, which can be explained by the fact that the amount of Hungarian bonds held by foreign investors significantly dropped in the last months of 2008."
“The surplus on the capital balance - which contains inflow of EU funds - was EUR 863mn in 1Q09. Thus, the country's financing ability in the period was positive (EUR 272mn). In case of Hungary which had been heavily reliant on external (usually debt-creating) financing in the previous years, this phenomenon (no financing need at all, being a net lender) seen as unique. Given the global deleveraging process, however, it should not have come as a big surprise that there is no way to run large financing need now."
“All in all, this morning's figures have justified that the current economic downturn would bring a significant improvement in the economic balance situation also in Hungary this year, which could remain an important fundamental support for the stabilization of the forint. The C/A deficit for FY2009 is not expected to be higher than 4% of GDP, after 8.4% of GDP, seen in 2008."
“Q1 current account figures came as a positive surprise, the current account posted EUR 0.591 bln deficit sharply down from the EUR 2.583 bln shortfall int he same period of 2008, and lower than the 1.25 bln market consensus. The result was better than our 1.1 bln projection as well. The trade balance (goods and services) registered a surplus of EUR 822 mln, while the income balance narrowed from minus 2.1 bln to minus 1.413 bln. The improvement in the trade balance came as no surprise, but the lower deficit in the income balance was not entirely expected."
“The net external financing position of Hungary improved quite significantly, the financing need actually disappeared, partly reflecting the improvement in the trade balance and partly as a result of higher EU transfers. The net external financing capacity of Hungary moved into positive territory for the first time since 1995 confirming that the external position of the country is going to improve significantly this year and the next. The seasonally adjusted quarterly external financing need was EUR 1.078 bln or 4.8% of the GDP that is a 1.8% improvement compared to the same period of 2008. After the better than expected Q1 figures we will likely revise down our FY forecast, the FY C/A deficit might be around 4% of the GDP -down from 8.4% in 2008."
Zsolt Papp, KBC, London
"Hungary's current account deficit amounted to EUR 591m, much less than the expected EUR 1.5bn. The current account plus the capital account even posted a surplus of EUR 272m. According to the National Bank of Hungary (NBH) this is the first surplus since 1995! Main reasons are the trade surplus (due to the collapse in imports) and EU transfers."
"The financial market has already responded positively: EUR-HUF down to 273 from 275. Coupled with yesterday's story that Hungary could emerge a "fiscal champion" from this recession (which in our view is questionable) this could generate enough momentum to carry the equity market higher in the days ahead.
"Hungary's fundamental problems, however, are still the same. The economy is suffering from the most severe recession of all new EU members, the government has no room to ease fiscal policy, monetary policy has been tightened since the beginning of this year and elections in April 2010 imply considerable policy uncertainty. In short, not a screeming buy in our opinion. But, as mentioned above, newsflow seems good enough to push the Hungarian markets up."
Gergely Suppan, Takarékbank, Budapest
"Hungarian C/A deficit fell to EUR 591m in Q1 from 2583m in Q4 and from 1651m a year ago. As expected goods and services balance improved remarkable as imports fell more than exports, income deficit fell noticeable as corporate profits dropped and foreign investors sold government bonds already in the previous quarter. Current transfers have been improved by EU transfers. Moreover, capital account balance also benefited from EU transfers which showed a surplus of EUR 863m. Thus, Hungary reached an external financing ability of EUR 272m instead of huge financing need from abroad in the last decade. Net FDI was EUR 159m which resulted in a net creditor position of the Hungarian economy. We expect a similar improvement of C/A throughout 2009 as domestic demand falls considerable, Forint weakness increased competitiveness of Hungarian products and services, corporate profits are falling, and Hungary could rely on increasing EU transfers. Thus, we expect that cumulative current and capital account will fall below 2% of GDP which seems to be easy covered by even a lower net FDI inflow. C/A deficit is expected to narrow to EUR 4bn in 2009 from 8.9bn in the previous year."
Timothy Ash, Royal Bank of Scotland, London
“The NBH just released BOP data for Q1 which showed a marked improvement both YOY and on the consensus in the current account deficit."
"Net-net the data should be supportive of the HUF, easing concern over the external financing requirement; albeit note that the capital account is still underpinned by official financing. The hope will presumably be that if the government manages to keep reform momentum on track, portfolio flows will begin to recover; portfolio outflows totalled €6.1bn for the half year to March - equivalent to around 7% of GDP."
Orsolya Nyeste, Erste Bank, Budapest
“C/A deficit amounted to EUR 591mn in 1Q09, remaining well below our expectation of EUR 1.1-1.2bn. Please note that the C/A deficit was EUR 2.583bn in the last quarter of 2008, thus the improvement that has taken place during a quarter was close to EUR 2bn, indicating a spectacular adjustment in the external balance of the Hungarian economy."
“The surplus on the trade balance amounted to EUR 685mn in January-March, while that on the services balance was EUR 137mn. The deficit on incomes - which is traditionally high in Hungary - showed an improvement of EUR 637mn in 1Q, compared to the previous quarter. The reasons could have been on one hand lower profit taking of multinational firms - as their overall profit may have been lower, due to the ongoing recession. On the other hand, interest payment obligations decreased as well, which can be explained by the fact that the amount of Hungarian bonds held by foreign investors significantly dropped in the last months of 2008."
“The surplus on the capital balance - which contains inflow of EU funds - was EUR 863mn in 1Q09. Thus, the country's financing ability in the period was positive (EUR 272mn). In case of Hungary which had been heavily reliant on external (usually debt-creating) financing in the previous years, this phenomenon (no financing need at all, being a net lender) seen as unique. Given the global deleveraging process, however, it should not have come as a big surprise that there is no way to run large financing need now."
“All in all, this morning's figures have justified that the current economic downturn would bring a significant improvement in the economic balance situation also in Hungary this year, which could remain an important fundamental support for the stabilization of the forint. The C/A deficit for FY2009 is not expected to be higher than 4% of GDP, after 8.4% of GDP, seen in 2008."
