The Hungarian economy experienced a significant improvement in its external and internal balances, as underlined by the Quarterly Report on Inflation published by the Magyar Nemzeti Bank on 2 June. The country’s current account shows a surplus and the external financing capacity is expected to remain positive in the coming two years. The observed revenue and expenditure trends for 2010 imply a 4.5 per cent fiscal deficit as a percentage of GDP. Although the fiscal developments show some slippage compared to the budget law, fiscal tensions stemming from the accumulated debt of state-owned enterprises do not endanger the sustainability of government finances, as a potential takeover of these debts would cause only a one-off increase in the deficit figures. The recovery in global economic activity brought the recession in Hungary to an end. Although domestic demand remains sluggish, imported commodity price inflation poses inflationary risks. The Magyar Nemzeti Bank remains committed to its 3% inflation target.