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External financing surplus widens as EU capital transfers restart

MNB

MNB headquarters in Budapest (Image by Jessica Fejos)

Hungaryʼs external financing capacity rose to EUR 539 million in August from a mere EUR 14 mln in July, mainly due to the restart of European Union capital transfers, monthly preliminary balance of payments data from the National Bank of Hungary (MNB) show, as summarized by state news agency MTI.   

The trade of goods still showed a deficit, although reduced by EUR 22 mln from the EUR 139 mln deficit in July as both exports and imports rebounded with the end of the bulk of scheduled summer shutdowns. The lower goods deficit was also a factor in the rise of the financing surplus.   

Of external financing components, the current account surplus rose to EUR 200 mln, from just EUR 10 mln in July and an outstanding EUR 917 mln in June, while the capital account surplus - reflecting almost exclusively capital transfers from the EU - rose to EUR 340 mln after dropping to EUR 4 mln in July - after an extraordinary EUR 814 mln in June. 

Within foreign trade, the surplus on services narrowed about EUR 100 mln from the previous two months to EUR 587 mln, as the tourism surplus slightly widened to EUR 341 mln, but the surplus on other services shrank further, to EUR 246 mln, the preliminary figures show. 

Net capital transfers from the EU, at EUR 341 mln in August, were over the seven-month average but down from the more than EUR 410 mln average of June and July. The transfers rose to EUR 1.4 bln in Q2, up from EUR 141 mln in Q1.

Current transfers were also up and net transfers from the EU on the whole jumped almost tenfold from a month earlier, to EUR 533 mln in August. 

Meanwhile, the deficit in primary income narrowed to EUR 356 mln, including 10% higher net wage transfers from abroad of EUR 245 mln. The deficit on secondary income shrank to EUR 9 mln.

The monthly financial account indicates that the EU transferred already committed funding to the Hungarian government and the government also transferred already received EU monies to ultimate recipients in August, both similar to July. 

The above movements are reflected in a EUR 88 mln drop in "other government receivables" - the item including advances paid out by the government to successful applicants for EU funding - in August, following on from a EUR 284 mln drop in July that came after massive pre-financing, to the tune of over EUR 1.4 bln, in the second quarter.

At the same time, the volume of EU funding received by the government from Brussels but not yet transferred further to ultimate recipients dropped by EUR 283 mln, after a EUR 176 mln drop in July and a EUR 78 mln drop in Q2.

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