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Hungary savings ratio slips to 3.1% of GDP in four quarters ending Q1

The net financing capacity of households, or net household financial savings, reached HUF 801 billion or 3.1% of GDP in the four quarters ending Q1, fresh data from the National Bank of Hungary (MNB) show.

The ratio slipped after reaching a 3.5-year peak at 3.6% in the four quarters ending Q3 2009. In Q1, two-thirds of net savings came from loan repayments, mainly of foreign currency loans.

The ratio dropped from 3.3% for the full year of 2009. The drop could be bigger as transfers made from private pension funds on behalf of those opting to return to the state pension system reduced net savings of the four quarters by HUF 96 billion or 0.4% of GDP (and improved the general government's financing position by a similar amount) as against an earlier reported 0.16%-of-GDP effect for the full year in 2009.

Net financial savings of households totaled HUF 214 billion or 3.6% of GDP in Q1. Seasonally-adjusted savings reached 2.7% of the quarter's GDP, rising a touch from 2.6% in Q4, but dropping from 4.0%, a three-year peak, in Q1 2009.

Hungary's traditionally low savings ratio jumped from an adjusted 0.7% of GDP in Q3 2008 to 3.1% in Q4 2008 as the crisis pushed back borrowing and boosted savings. The annual net financial savings ratio bottomed out at 0.1% in 2003, rose to 4.3% of GDP in 2005, and fell each year to reach 1.2% in 2008 before rising in 2009.

Gross saving totaled HUF 88 billion in Q1, dropping by a sharp HUF 67 billion from a year earlier. Already from the beginning of 2009, gross savings fell by one-third or more as the crisis raised unemployment and reduced resources to save.

Households repaid net HUF 126 billion in loans in Q1, more than in Q1 or Q3 2009. Prior to Q1 2009, households last repaid more loans than they borrowed in Q1 2000.

Households repaid HUF 122 billion of foreign currency-denominated loans, of which just HUF 20 billion were mortgages, and they took out HUF 75 billion in forint loans, including HUF 25 billion of mortgages.

On the savings side, households withdrew HUF 206 billion from bank deposits in Q1 only to place HUF 51 billion in fixed-income papers, buying net HUF 75 billion of bank securities, mostly long-term ones, while cutting their government securities portfolio by a little more than HUF 20 billion. They used the balance to invest HUF 187 billion in investment fund units while they sold HUF 46 billion of listed shares. Households saved a combined HUF 107 billion in insurance policies and pension funds in the quarter.

Their cash holdings fell a little less than HUF 50 billion as they cut their fixed forint deposits significantly and raised foreign currency deposits by HUF 45 billion. The stock of these deposits rose by HUF 8 billion less, however, as the forint firmed moderately against the euro, suggesting that the bulk of these deposits could be in euros. With most outstanding foreign currency retail loans in Swiss francs, a slip of the forint against the Swiss franc raised the forint value of the stock by HUF 121 billion, practically eliminating the effect of repayments. (MTI-Econews)