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State debt ratio falls to 72.4% at end of Q3

Hungaryʼs state debt as a percentage of GDP reached 72.4% at the end of the third quarter of 2018, revised data released by the National Bank of Hungary (MNB) last Friday show, according to a summary by state news agency MTI.

The ratio, which includes Magyar Eximbank, was revised down from 72.8% in a preliminary release of data on November 19.  The ratio fell from 73.8% at the end of Q2, and 73.6% at the end of Q1. The ratio stood at 73.3% at the end of 2017.

The MNB recently began publishing separate state debt ratios, with and without the balance sheet of Magyar Eximbank, in line with a decision by Eurostat, which had maintained for years that Eximbank should be reclassified inside the general government sector, raising state debt.

Excluding Eximbank, the state debt ratio would have reached 70.5% of GDP at the end of Q3, down from 71.8% at the end of Q2, and 71.3% at the end of 2017.

In nominal terms, Hungaryʼs consolidated state debt reached HUF 29.693 trillion at the end of Q3, up from HUF 29.535 tln at the end of Q2, and HUF 28.095 tln at the end of 2017.

Excluding Eximbank, consolidated state debt would have reached HUF 28.927 tln at the end of Q3, up from HUF 28.742 tln at the end of Q2, and HUF 27.359 tln at the end of 2017.

The data excluding Eximbank show net borrowing raised nominal debt by HUF 184 bln, as transactions added HUF 277 bln to the stock while revaluations reduced it by HUF 92 bln.

Net liabilities of the general government amounted to HUF 23.421 tln, or 57.1% of GDP, at the end of Q3. 

The net financing requirement of the general government, which MTI noted is a good approximation of the general government deficit, was HUF 896 bln, or 2.2% of GDP in the four quarters to the end of Q3. The general government had a net financing requirement of HUF 69 bln in Q3, equivalent to 0.6% of quarterly GDP.

General govʼt breakdown, households

In Q3 2018, net lending of the central government amounted to HUF 98 bln. Deposits with the central bank increased significantly, while claims from the European Union rose further, as seen in the previous quarter. There was also a small amount of lending by central government during the quarter.

Significant deposit-making by local governments and large government bond issues played an outstanding role in the increase in the sub-sectorʼs financial liabilities, noted the MNB.

Net lending of local governments was HUF 7 bln in Q3. Net borrowing of the social security funds was HUF 36 bln.

Net lending of households, at HUF 2.528 tln, was equivalent to 6.2% of GDP in the four quarters to the end of Q3 2018. In Q3 alone, net lending stood at HUF 538 bln, equivalent to 5.0% of quarterly GDP.   

Within householdsʼ financial assets, there was a significant increase in currency, current account deposits and debt securities issued by central government, due to transactions. The increase was less pronounced in shares and other equities. By contrast, domestic mutual fund shares and time deposits decreased.

Non-profits, corporations

Net lending of non-profit institutions serving households was HUF 265 bln, or 0.6% of quarterly GDP, in the four quarters to the end of Q3 2018. In Q3 alone, net borrowing of non-profits was HUF 92 bln, or 0.9% of quarterly GDP.

The financing requirement of non-financial corporations was HUF 1.385 tln in the four quarters to Q3, and HUF 540 bln in the third quarter alone, representing an annual 3.4% of GDP and quarterly 5% of GDP, respectively.

Corporationsʼ financial assets rose strongly due to transactions, the MNB said, while adding that the increase in their liabilities exceeded that of their assets.

On the liabilities side of the sub-sectorʼs balance sheet, there were significant increases in borrowing from credit institutions and foreign equity; however, inter-company loans also rose significantly due to transactions.

Net borrowing of the national economy was HUF 620 bln, or 1.5% of GDP, in the four quarters to Q3 2018, and HUF 97 bln, or 0.9% of quarterly GDP, in Q3 alone.