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High net lending accompanied by a further decline in external debt


Budapest, 12 April 2018 – In 2017, the net lending of the Hungarian economy amounted to more than 4 per cent of GDP, remaining well above the level typical for the countries in the region. After falling compared to the previous year, domestic savings primarily stem from the trade surplus, which is still high despite falling as a result of strong domestic demand, although this has been partly offset by the rising absorption of EU transfers. In conjunction with the favourable external position, Hungary's external debt decreased further: gross external debt fell by almost one half, to 60 per cent, while net ratio decreased to 13 per cent of GDP, and thus the external vulnerability of the economy continued to decline.

In the fourth quarter of 2017, Hungary's net lending exceeded 4 per cent of GDP, which continued to reduce the country's external vulnerability to a considerable degree. Similarly to the trend observed in the other countries in the region, the trade surplus declined mainly due to the strong growth in import-intensive investment and the consumption of households, while Hungary's export market share expanded. The decline in the external position was curbed by the robust improvement in the transfer balance resulting from the absorption of EU transfers. Owing to the sizeable trade surplus and the absorption of EU funds, Hungary's net lending and current account surplus still significantly exceed the values observed in the other countries in the region. The high level of domestic savings is primarily attributable to the substantial financial savings of households and the moderate budget deficit.

The high level of net lending recorded in 2017 and the still significant net FDI inflow (almost EUR 2 billion on an annual level) supported the decline in Hungary's external debt. As a result of this, Hungary's gross external debt fell by almost one half, declining to 60 per cent, while the net ratio decreased by 42 per cent to 13 per cent of GDP; the latter indicator is even lower than the Polish or Slovak level. External debt with maturity of less than one year, which bears the utmost importance in terms of external vulnerability, also fell to a historic low (EUR 16.4 billion), while foreign exchange reserves rose at the end of the year, and thus the volume of reserves remains well higher than the level expected by investors.