October 24, 2022
In 2022 Q2, the current account balance declined to a degree similar to that seen in the countries in the region in Hungary, which was almost exclusively due to the worsening energy balance. Nevertheless, net external debt of the economy fell to a historically low level of 7 per cent of GDP. International reserves increased to EUR 37.5 billion, significantly exceeding short-term external debt, which is particularly watched by investors.
In 2022 Q2, Hungary’s four-quarter current account deficit and net borrowing of the economy amounted to 6.6 per cent and 3.3 per cent of GDP, respectively. The decline in external balance indicators, the degree of which is similar to that seen in the countries of the region, is primarily attributable to the decrease in the goods balance (which is related to the surging energy prices), while other items of the current account, such as the changes in the services, income and transfer balances, supported the improvement in the external balance.
The government’s net borrowing continued to decline in Q2 as well, and thus the higher external borrowing requirement is primarily attributable to a decrease in the private sector’s financial savings. During the quarter, net borrowing of the economy was financed partly by debt inflows related to the state and partly by net foreign direct investment. The latter even increased with net FDI inflows of almost 2.2 billion EUR in July.
As a result of revaluation and a major expansion in nominal GDP, external debt ratios declined, with the net indicator amounting at a historically low level of 7 per cent in June 2022. International reserves increased to 37.5 billion EUR, still significantly exceeded the level of short-term external debt, which is monitored most closely by investors.
Source: Magyar Nemzeti Bank – Hungary
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