The financial crisis and the experience of recent months have highlighted the fact that the balance of payments, presenting a country’s external dependence, is a key measure in assessing financial stability. Developments in the balance of payments help draw conclusions, for example, about the sustainability of economic growth and the associated risks. For this reason, the MNB has launched a new publication series with the aim of providing regular and comprehensive analyses of developments in Hungary’s external balance position, macroeconomic relationships, and identify factors critical in terms of the country’s vulnerability. The new Report is intended to help market participants and analysts obtain a comprehensive picture of developments in Hungary’s external balance position and the deeper relationships within the economy.
Hungary’s external balance position improved considerably during the years following the outset of the crisis. This is seen as a very positive development in terms of perceptions about the economy. The current account balance moved into surplus, reflecting the significant adjustment by the government and private sectors, thereby reducing the country’s external debt and the economy’s dependence on external finance.
Balance of payments statistics show that the current account surplus as a percentage of GDP rose from 0.8 per cent in 2012 to 3.0 per cent in 2013, and the country’s net lending, which also includes the capital account balance, amounted to 6.5 per cent in 2013, up from 3.5 per cent in 2012. All three sub-accounts contributed to the improvement: the trade surplus and the use of EU transfers increased, while the deficit on the income account fell slightly. The country’s high net lending, associated with continuing foreign direct investment inflows last year, allowed Hungary to repay around EUR 8 billion of external debt. Consequently, the country’s net external debt declined from a peak of over 60 per cent as a percentage of GDP in early 2009 to 35 per cent by the end of 2013. This was significantly below the level posted before the outset of the crisis.
Despite the significant adjustment and positive developments, Hungary’s external debt remains relative high by regional standards, which requires continued monitoring of developments in the country’s’ external balance position.