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Hungary has net external financing requirement in August

Hungary recorded an unusual net external financing requirement of EUR 91 million in August, as a EUR 225 mln capital account surplus failed to offset the EUR 316 mln deficit on the current account, monthly balance of payments data published by the National Bank of Hungary (MNB) on Tuesday show.

The July-August external balance was still in the black, with a net external financing capacity of EUR 152 mln resulting from a current account deficit of EUR 386 mln and a capital account surplus of EUR 538 mln, state news agency MTI reported.

The bulk of the big current account deficit in August came from a EUR 545 mln deficit in the trade of goods, with especially exports but also imports sharply down from July, probably reflecting summer shutdowns, noted MTI. The goods deficit was up almost EUR 140 mln from July.

In the meantime, the surplus in the trade of services moderately widened, to EUR 780 mln.

The August deficit on primary income was marginally higher than in July, at EUR 430 mln, while the deficit on secondary income widened to EUR 121 mln.

The EUR 225 mln surplus on the capital account was down from EUR 312 mln in July.

Net transfers from the European Union totalled EUR 274 mln in August, with the bulk of EUR 224 mln in capital transfers. These figures dropped from a respective EUR 389 mln and EUR 310 mln arriving in July.

Hungaryʼs current account was in the red in three of the past four quarters - the exception was Q1 this year - as the trade in goods shifted into a deficit. The countryʼs net financing capacity still persisted, however, as the c/a deficits were more than compensated for by large surpluses on the capital account - reflecting nearly fully capital transfers from the EU.

In its September Inflation Report, the MNB forecast Hungary to post a current account deficit for the second year in a row. It expects the deficit to grow as the slowdown on export markets and strong domestic investment activity reduce the surplus on overall trade. However, it forecasts the c/a balance to improve from 2020.

The MNB also projects stable net external financing capacity at around 2% of GDP ahead, with changes in the trade balance to be offset by net inflows from the European Union.