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Hungary's external debt ratios continued to improve

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Budapest, 8 January 2019 – In 2018 Q3, the net lending of the Hungarian economy and the current account surplus amounted to 3.4 percent and 1.8 percent, respectively. As a result of the persistently high net lending, which substantially exceeds the level registered by the countries of the region, the external debt ratios continued to decline, while net FDI rose substantially.

In Q3 2018, Hungary's net lending and current account surplus amounted to 3.4 percent and 1.8 percent of GDP, respectively. With this, the current account has continuously registered a surplus since 2010. The moderate decline in net lending is attributable to the decrease in the balance of goods, which recorded an outstanding surplus in 2016, with domestic demand, and in particular transient factors also playing a role, in addition to the dynamic growth in investments. In the third quarter, the deterioration of the terms of trade, technical problems at the Paks nuclear power plant and temporary problems in the vehicle industry caused by the EU regulations reduced the surplus on the balance of goods. At the same time, the effect of these factors was partly mitigated by the growth in the surplus on the services balance and the rise in the absorption of EU transfers. The decrease in the general government's net borrowing is attributable to the moderate budget deficit, while households' savings increased further. By contrast, in line with the growth in investments, enterprises' net borrowing increased. Both the current account surplus and net lending are well above the levels registered by the countries in the region.

In line with the net lending, Hungary's external debt ratios continued to decrease. Net external debt fell below 9 percent of GDP, marking the lowest value for this indicator to date. Following a decline of 2 percentage points, the gross external debt of the economy amounted to 58 per cent of GDP. Similarly to the previous quarters of the year, a substantial net FDI inflow was recorded in the third quarter as well, and the amount of EUR 2.3 billion, which was registered for the first three quarters, is well above the year-on-year values. Short-term external debt, a key indicator in terms of external vulnerability, fell to EUR 18.2 billion – thus the foreign exchange reserves of EUR 23.7 billion registered at the end of September still substantially exceed the level expected and considered safe by investors.

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