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Hungary gen govt net financing capacity rises on transfer of pension assets

Hungary's general government net financing capacity was HUF 1,379 billion, equal to 5.0% of GDP, in the four quarters to Q1 2011, rising because of capital transfers from households to the general government in the form of withdrawals from private pension funds in the first quarter, the National Bank of Hungary said in preliminary financial accounts data published on Monday.

Hungarian members of private pension funds had until the end of January to opt out of a move, along with their assets, back to the state pension pillar. About 97% of members returned to the state pillar, bringing about HUF 3,100 billion in assets with them.

Excluding the assets transferred, the general government had a net financing requirement equal to 4.6% of GDP in the four quarters to Q1 2011, the NBH said. General government consolidated gross debt at nominal value amounted to HUF 22,456 billion or 81.6% of GDP at the end of the period. Net debt came to HUF 14,518 billion or 52.8% of GDP. Net debt fell because of the pension transfers, but gross debt was unaffected as the pension assets have not yet been transferred and the withdrawal of government securities and the sale of other assets has not yet started, the NBH said.

In Q1, the general government net financing capacity was HUF 2,289 billion, equal to 36% of GDP for the quarter. Excluding the effect of the pension transfers, the general government had a net financing requirement of HUF 361 billion or 5.6% of GDP for the quarter. The net financing capacity was also affected on the assets side by a big increase in deposits with the central bank and loans to credit institutions. On the liabilities side, there was a significant increase in security liabilities and a decline in loan liabilities. The HUF 69 billion net financing capacity of local governments is mainly the result of an increase in deposits. The social security funds financed net borrowing of HUF 85 billion mainly with loans from the central government.

Households had a net financing requirement of HUF 1,323 billion, equivalent to 4.8% of GDP, in the four quarters to Q1 2011. Excluding the transfer of pension fund assets, households had net financing capacity of HUF 1,327 billion, equal to 4.8% of GDP.

In Q1, households had a net financing requirement of HUF 2,330 billion or 36.4% of GDP for the quarter. Excluding the effect of the pension transfers, households had net financing capacity of HUF 320 billion or 5.0% of GDP for the quarter.

On the assets side, households' pension fund reserves declined sharply, but cash holdings also fell, while holdings of debt securities and other assets increased. On the liabilities side, there was an increase in forint loans and a decline in foreign currency loans. Households' other liabilities also fell significantly.

The detailed financial accounts of Q1 2011 will be published on July 1, 2011.