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Pension assets transfer gives Hungary big Q1 general govt financing capacity

Hungary's general government had net financing capacity of 35.7% of GDP in the first quarter of 2011, and 4.8% of GDP in the four quarters ending 2011 Q1, a second reading of the National Bank of Hungary financial accounts data shows.

The shift in the financing position was exclusively due to the transfer of the assets of former private pension fund members to the state pension system, which took place in June but was entered in the accrual-based financial accounts in Q1 because members had to make a declaration on not returning to the state pension pillar by the end of January.

Excluding the pension fund assets transfer, the general government had a net financing requirement of 6.3% of GDP in Q1, according to both unadjusted and seasonally-adjusted figures.

The net general government financing requirement in the four quarters ending 2011 Q1, excluding the transfer, was 4.8% of GDP, unchanged from the full year of 2010, which was the lowest ratio since the four quarters ending Q1 2009.

The NBH estimated the assets transferred to be HUF 2,650 billion or 9.7% of annual GDP. The figure excludes real yields due to former fund members, which the national bank put at about HUF 260 billion. The NBH estimate was somewhat below the actual value, of HUF 2,946 billion of the transfer, including the real yield as reported by financial market regulator PSzÁF on June 14, after the close of the transfer.

The net financing capacity figures were revised slightly down and the transfer-adjusted financing requirements were slightly higher than in the first reading released on May 16. The NBH said changes made to the accounting of profit tax in Q1 transactions and stocks after consultations with the Central Statistics Office (KSH) reduced net government financing capacity by HUF 21 billion.

The Q1 net financing requirement of 6.3% of quarterly GDP was up from seasonally-adjusted financing requirements of 4.2% in Q4 and 4.7% in Q3, but was level with the 6.3% ratio measured in Q2 2010.

Gross consolidated general government debt at nominal value, or debt in line with Maastricht calculations, amounted to HUF 22,458 billion or 81.9% at the end of March as the transfer yet did not affect the gross debt figure. Debt at the end of March rose HUF 708bn from the end of 2010 when it stood at 80.2% of GDP, and was revised up from 81.6% of GDP in the first reading.

The pension assets transfer also distorted the position of households which had a Q1 net financing requirement equivalent to 37.2% of GDP and a net financing requirement of 4.9% of GDP in the four quarters ending Q1.

Excluding the assets transfer into the state pension system, households had net financing capacity (net financial savings) of 4.8% of GDP in Q1 and 4.8% in the four quarters ended in Q1, up from 4.6% for the full year in 2010.

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.