Hungaryʼs net external financing capacity among highest in EU



Hungaryʼs net external financing capacity - the combined surplus of the current and capital accounts - fell in 2016, but was still among the highest in the European Union as a percentage of GDP, the National Bank of Hungary (MNB) said in a balance of payments report released Thursday, as reported by state news wire MTI.   

Hungaryʼs net external financing capacity fell to around 5.4% of GDP last year on a decline in EU transfers as the previous funding cycle wound up, the MNB said. The average net external financing capacity for all 28 EU member states stood at 2.8%, according to a forecast by the European Commission, it added.   

Hungaryʼs current account surplus rose to close to 5% of GDP last year, supported by a trade surplus of more than 10% of GDP, a new record. The trade surplus rose on a decline in imports - as investments fell - a high services balance and an improvement in the terms of trade.   

The trade surplus, as a proportion of GDP, was well above those of the Czech Republic, Poland and Slovakia, the MNB noted. It added that the surplus in services also well exceeded the level typical for the region, mainly because of a big tourism surplus.

International reserves exceed expectations

In a separate report from MTI, the MNBʼs international reserves were said to still "substantially exceed" investor expectations, despite falling by almost EUR 6 billion last year, according to a report by the central bank on Thursday.

International reserves fell to EUR 24.4 bln at the end of 2016 from EUR 30.3 bln a year earlier. 

The MNB noted that the reserves were well over short-term external debt, which stood at EUR 18.4 bln. According to the Guidotti-Greenspan rule, a central bankʼs international reserves should match the countryʼs short-term external debt.


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