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Current account surplus bigger than expected in Q4

Hungary's current account surplus was bigger than the market consensus in the fourth quarter but did not cause a big surprise, analysts told MTI on Thursday after the National Bank of Hungary published fresh data.

Hungary had a c/a surplus of €366 million and net external financing capacity – a positive combined balance of the current account and the capital account – of €875 million in Q4 2010, unadjusted figures published by the MNB show.

Seasonally-adjusted net inflow of transfers from the European Union, including current and capital transfers, rose to €934 million in Q4 – the highest level since Hungary's EU accession in 2004 – and accounted for most but not all of the quarter's net external financing capacity.

Gergely Suppán of TakarékBank said the Q4 c/a surplus was bigger than expected, but noted that data published earlier by the Central Statistical Office (KSH) had shown a widening trade surplus. The high net external financing capacity was also good news, he added.

The surplus will fall this year but could still be around €1 billion, he said. Hungary's net external financing capacity could reach €3.5 billion in 2011 and FDI could come in around €2 billion, he added.

The repatriation of assets of private pension fund members who return to the state pension pillar could generate big demand for forints and raise the MNB's international reserves too, Suppán said. That could mean "gigantic" support for the forint and a reduction in exchange rate vulnerability, he added.

Erste Bank's Zoltán Árokszállási said he expects the c/a surplus to fall to around €900 million in 2011. The narrowing will be a healthy trend as it shows growing imports and improving domestic consumption, he added. The c/a could have a deficit again in 2012, Árokszállási said.