MNB confirms state debt at 74.4% of GDP at end of H1

In an updated release on Hungaryʼs Q2 financial accounts, the MNB communicated on Monday that the state debt to GDP ratio in Q2 2017 fell from 75.8% at the end of June a year earlier, national news agency MTI reports.

In nominal terms, state debt reached HUF 26,915 billion at the end of Q2, rising from HUF 26,682 bln at the end of Q1. Net borrowing increased the nominal figure by HUF 283 bln, but revaluations decreased it by HUF 49 billion in the second quarter.

State debt rose around HUF 736 bln in nominal terms from Q2 2016 to Q2 2017, as a balance of net borrowing of HUF 967 bln which was reduced by HUF 231 bln through the devaluation of FX debt. Net liabilities of the general government amounted to HUF 22,961 bln, or 63.4% of GDP, at the end of Q2 2017.

The net financing requirement of the general government, which is a good approximation of the general government deficit, was HUF 512 bln, or 1.4% of GDP, in the four quarters to the end of Q2. The general government had a net financing requirement of HUF 591 bln in Q1 2017.

In Q2 alone, net lending, calculated from the financing side, was HUF 34 bln, or 0.4% of quarterly GDP. In Q1, net lending was HUF 211 bln, or 2.5% of quarterly GDP.

In Q2 2017, net lending of the central government amounted to HUF 63 bln. On the assets side, there was a significant increase in other financial assets, and particularly in claims on the EU, as well as in trade credits and advances granted to non-financial corporations. The stock of loans granted by central government also rose. The increase in assets due to transactions was partly offset by a significant decline in the stock of deposits with the central bank and credit institutions.

On the liabilities side, the stock of long-term securities increased significantly due to transactions, with households and local governments being the main lending sectors. The amount of government securities held by the non-resident sector decreased further due to transactions. Loans and financial derivatives fell slightly. Trade liabilities accounted for most of the modest increase in other liabilities.

Net lending of local governments totaled HUF 26 bln in Q2 2017. Investments by local governments in government bonds increased significantly, while there were net sales of Treasury bills. Other financial assets of the sub-sector increased slightly. On the liabilities side, short-term loans from credit institutions rose and there was an increase in other liabilities to central government with a decline in tax liabilities.

Net borrowing of the social security funds was HUF 56 bln in the second quarter. On the assets side of the sub-sectorʼs balance sheet, the contribution of receivables from households increased. On the liabilities side, only the stock of short-term loans by central government increased significantly.

Net lending of households stood at HUF 1,578 bln, equivalent to 4.4% of GDP in the four quarters to the end of Q2 2017. In Q2 alone, net lending stood at HUF 483 bln, equivalent to 5.2% of quarterly GDP.

Within householdsʼ financial assets, currency and current account deposits increased significantly. Net withdrawals from time deposits continued, and demand for government securities was strong.

Investments in long-term securities increased, accompanied by net sales of short-term securities. Loan liabilities of the household sector increased in Q2 due to transactions. Net borrowing continued in the case of both housing loans and consumer and other loans.