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Hungary's current-account deficit drops in 2006

Hungary's current account deficit was €1.117 billion in Q4 2006, reaching a full-year €5.197 billion, dropping €280 million €894 million from a year earlier, preliminary National Bank of Hungary (MNB) figures published on Friday show.

The narrower deficits reflected a sharp improvement in the trade balance on the current account, with the balance of services and income transfers remaining more or less unchanged from twelve months earlier. The National Bank of Hungary that it does not consider the preliminary 2006 figures it published as an annual figure because FDI-related income figures were at this stage the bank's estimates. The bank said it will publish annual current-account balance data on 2006 first in September. The Q4 preliminary figure is slightly under the €1.35 billion estimate by analysts in a poll by Reuters. The analysts put the full-year deficit at €5.2 billion. The current-account deficit in Q4 narrowed €39m from the Q3. The MNB revised the Q3 deficit €27 million up to €1.156 billion, and revised the Q2 deficit up by €13 million to €1.469 billion. In 2005 Hungary had a Q4 current-account deficit of €1.397 billion and a full-year deficit of €6.091 billion, both revised slightly up from earlier. Adjusted for seasonal effects, the Q4 current-account deficit was €1.156 billion, down by a slight €25 million from the Q3 and the lowest figure in the past eight quarters.

Hungary's net external financing requirement (the combined balance of the current account and the capital balances) narrowed further to €768 million in Q4, or a seasonally-adjusted €1.131 billion, equivalent to 5% of GDP. Calculated from the financial balance or bottom line up, the Q4 net financing requirement was an unadjusted €1.350 billion and a seasonally-adjusted €1.521 billion, or 6.6% of GDP. In 2006 the net external financing requirement narrowed by €898 million from 2005 to €4.484 billion. Non-debt-generating capital flows turned, however, into a net outflow of preliminary €447 million in Q4 compared to net inflow of €2.799 billion a year earlier, reflecting a jump in Hungarian direct investments abroad, to €1.369 billion, in the Q4. Additionally, there was a net €521 million withdrawal of foreign direct investment from Hungary in the quarter, compared to net FDI inflow of €2.433 billion one year earlier. Portfolio investment into shares and stakes brought, however, in net €287 billion in Q4 after outflows in the previous two quarters and an outflow of €555 million in Q4 2005.

In 2006 Hungary registered net non-debt-generating capital outflow of €487 million for the full year, compared net inflow of €3.368 billion for all of 2005. Most of the deterioration in full-year external financing came from a drop of net FDI in Hungary, to €1.394 billion from €3.3.966 billion in 2005 as Hungarian businesses' foreign direct investments were up just a tad at €1.852 billion. In 2006 net €658 million flew out in non-debt generating portfolio investments, more than the €482 million outflow on year earlier. Hungary had a trade surplus of €159 million in the Q4, running a surplus for the first time since 1995, and against a €318 million trade deficit a year earlier.

For the full year, Hungary ran a trade deficit of €417 million. The surplus on tourism rose both in Q4 and in the full year, to €369 million and €1.507 billion, respectively. The deficit on services excluding tourism dropped now for the Q2, and totaled €82 million in Q4, down from €148 million a year earlier. For the full year, however, the deficit on services excluding tourism surplus still grew, to €488 million from €357 million in 2005. Net outflow of debt-related income was €471 million in Q4, up €60 million in a year. The full-year figure came to €1.78 billion, up €132 million. Outflow of non-debt-related income (net profit repatriation) rose more, by €169 million in Q4 and by €437 million, respectively, to €1.141 billion in Q4, and to €4.421 billion.