Hungary's foreign trade balance deteriorates, battery exports halved

The larger contribution to the change came from the fall in exports, but the increase in imports also contributed to the slightly larger than usual revision, which has confirmed the turnaround in the external trade balance, which is now on a slightly downward trend.

The deterioration is not necessarily bad news, though.

• Firstly, there's ample room for the massive surplus to shrink, and this would not jeopardise Hungary's external balance.
• Secondly, the erosion of the surplus may suggest economic recovery if it takes place as a result of rising imports. Indeed, the increase in Hungary's import demand may indicate an expansion in domestic demand (consumption, investment, re-exports).

However, a closer look at the figures shows that

it is too early to attribute the external imbalances to a recovery,

which is not surprising given the third quarter GDP data released yesterday.

Although import volumes are up slightly from the spring trough, they have not yet really broken out of a downward trend. Exports, meanwhile, remain on a rather downward trend that may be labelled as a stagnant trend only in a benevolent interpretation.

Exports of Hungary's two main drivers, vehicle and battery production, are also in decline, reflecting the weakness of exports. In the case of the latter, the value of exports in euro has practically halved compared to its peak.

Cover image (for illustration purposes only): Getty Images