Hungary net external financing capacity 4.6% in Q1

We get a picture of the dynamic momentum in goods trading and the immense surplus every month. About the somewhat weaker performance in services we could learn indirectly from the Q1 GDP statistics.

In the first three months of 2011, the surplus on real economic transactions continued to increase and was higher than the income account deficit. It is no wonder the economy’s financing capacity is so high. On top of the current account’s EUR 787 million surplus there was a EUR 484 m surplus on the capital account (EUR 483 m worth of EU transfers). Hence Hungary, which is hell bent on cutting its public debt, is financing foreign countries with 4.6% of GDP.

As a consequence of the crisis Hungary’s access to external funding is difficult, which is reflected not only on the current items of the C/A, but also on the financing side data. The EUR 34 million net outflow on direct investment transactions by non-residents in Hungary resulted from a net increase in equity investment amounting to EUR 582 million, reinvested earnings allocated to foreign investors amounting to EUR 839 million and net outflows of EUR 1,455 million in FDI other capital.

Portfolio investment assets, however, grew, albeit the increase stems from state action. Portfolio investment assets rose by EUR 107 million. Within this, purchases of equity (representing less than 10% foreign ownership) amounted to EUR 77 million and purchases of bonds amounted to EUR 30 million. Liabilities increased by EUR 4,223 million. At EUR 2,766 million and EUR 1,131 million respectively, the largest increases were in bond and money market liabilities. The
Government Debt Management Agency issued two foreign currency bonds in a total value of USD 3.75 billion in Q1.

Within money market instruments, non-residents increased strongly their holdings of two-week NBH bills. Equity liabilities increased by EUR 326 million.

In light of the above it is no wonder that Hungary’s international reserves also increased.

Central bank foreign exchange reserves amounted to EUR 35.7 billion at the end of March 2011.

Hungary’s net foreign debt, excluding other capital recorded under direct investment and financial derivatives, amounted to EUR 52.9 billion at the end of March 2011 (53.4% as a percentage of GDP).

The amount recorded as net short-term asset due to the recording of EU transfers was EUR 543 million, of which the value of short-term assets was EUR 887 million and that of short-term liabilities was EUR 1,431 million.

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