Dividends make FDI in Hungary negative in Q2

Analysis

There was a €709 million outflow on foreign direct investment in Hungary in the second quarter of 2013, making the first-half balance also slightly negative, the National Bank of Hungary (MNB) balance of payment report published on Friday shows.

A large minus on reinvested profit well exceeded the inflow in new direct investments and net loans granted by foreign parent companies to their Hungarian units in the period, the figures reveal.

Reinvested profit is as a rule negative in Q2 when businesses take a vote on dividends. This often makes FDI on the whole negative in the quarter. The last quarters with an outflow of FDI were Q2 and Q3 of 2011. In Q2 2012, large profit repatriation was more than outbalanced by large lending of foreign owners to their Hungarian units.

While FDI was negative in Q2, portfolio investments brought in net €1.078 billion. The inflow, ongoing now for the fourth quarter, was about €400 million less than in the previous quarter. In Q2 2012, there was a €663 million outflow on portfolio investments.

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