Brexit to little impact Hungaryʼs balance of payments, says analyst

MNB

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The U.K.ʼs exit from the European Union will probably not have a significant effect in Hungary on labor income and remittances from abroad, Balázs Kóczián, an analyst at the National Bank of Hungary (MNB), said in a paper published on the central bankʼs website, Hungarian news agency MTI reported Saturday.

In the paper, Kóczián acknowledged the effect of labor income and remittances from abroad on Hungaryʼs balance of payments, but said that Brexit would “not have a significant impact” on the balance. First, he explained that the reduction in the number of Hungarians working in the U.K. as a result of stricter labor policy may not be as big as at first thought, based on statements made thus far. Second, he added that the impact of a weakening pound will be muted because of the “relatively small” share of labor income abroad and remittances from the U.K. 

Hungarians working in Austria and Germany earned about EUR 2.3 billion last year, or three-quarters of the total EUR 3.0 bln earned by all Hungarians working abroad. Hungariansʼ labor income in the U.K. came to just EUR 200 million last year, about 7% of the total.

Labor income and remittances from Hungarians working abroad reached around EUR 3.6 bln last year. This improved Hungaryʼs external financing capacity by some EUR 2.8 bln, taking into account the EUR 800 mln in labor income and remittances run up by foreigners – mainly from Slovakia and Romania – working in Hungary.

Hungarians living permanently abroad, and treated as non-residents in statistics, transferred about EUR 550 mln to Hungary last year. Data from 2014 show such remittances from the U.K. reached about EUR 160 mln, or 30% of the total, but Kóczián noted that the U.K. share has fallen in recent years while the share of remittances from Germany has gradually increased, reaching more than EUR 220 mln in 2014.

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