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External financing shrinks on goods trade deficit

MNB

Hungaryʼs external financing capacity fell sharply to just EUR 14 million in July as the foreign trade in goods saw a long-foreseen deficit and the usual capital account surplus, reflecting transfers from the European Union, practically disappeared, monthly preliminary balance of payments data from the National Bank of Hungary (MNB) show.

Of the external financing components, the current account surplus dropped to EUR 10 mln from an outstanding EUR 917 mln in June, while the capital account surplus fell to just EUR 4 mln from a high EUR 814 mln. It is too early to tell whether the drops are just temporary as they came after a sharp jump in both surpluses in June, state news agency MTI noted.

The foreign trade in goods showed a EUR 139 mln deficit after a high June surplus of EUR 623 bln. The shift could be connected to poor industrial performance - an adjusted 4.2% monthly drop in industrial output in July, attributed in part to summer stoppages, already reflected in an adjusted 4.2% drop in industrial output from June. The euro value of both exports and imports of goods was the lowest in three months.

The surplus in services, at EUR 682 mln, was little changed from June as the tourism surplus widened to EUR 337 mln, but the surplus on other services shrank to EUR 346 mln, the preliminary figures show.

There were practically no net capital transfers from the European Union in July: the drop to a mere EUR 5.1 mln compares with a jump to EUR 815 mln in June, more than double the May figure.

Meanwhile, the deficit in primary incomes narrowed to EUR 400 mln, including a practically unchanged EUR 220 mln of net wage transfers home from abroad. Secondary income shifted back into the usual monthly deficit after a surplus in May.

The monthly financial account indicates that the EU transferred already committed funding in July as "other government receivables" - the item including advances paid out by the government to successful applicants of EU funding fell EUR 284 mln in July. In Q2, the government paid out nearly EUR 1.6 bln in such pre-financing, according to preliminary MNB figures.

At the same time, the volume of EU funding transferred from Brussels to the government but not yet transferred to ultimate recipients dropped by a further EUR 176 mln. Such government liabilities fell by a preliminary EUR 85 mln in the second quarter.

The central bank will publish a first reading of Q2 balance of payments data on September 20.

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