Budapest, 4. October 2021 – Hungary’s current account deficit was moderate in 2021 Q2, while net lending rose to 1.1 per cent of GDP. Hungary’s net external debt remains low, while the level of international reserves is stable and significantly exceeds the level of short-term external debt.

As of mid-2021, Hungary’s four-quarter current account deficit was moderate, while net lending rose to 1.1 per cent of GDP. In addition to continued growth in the goods balance, the improvement in external balance indicators was also supported by an increase in the surplus of the services balance in the second quarter, due to the pick-up in tourism resulting from reopening. The steadily high drawdown of EU funds improved the external balance of the economy via the transfer balance.

The increase in net lending is mostly attributable to the decrease in the general government’s four-quarter deficit, thanks to higher tax revenues linked to reopening and the lower pandemic related expenses, while the private sector’s financial savings declined moderately. Within household savings, the volume of government bond purchases was once again significant, which continues to be a favourable trend in terms of external vulnerability.

Based on the financial account, net non-debt liabilities declined due to the usual dividend payments in 2021 Q2 and continued Hungarian equity investments abroad, with net external debt amounting to 8.9 per cent of GDP. In June 2021, Hungary’s international reserves totalled roughly EUR 31 billion, which exceeds the level expected and deemed safe by investors by almost EUR 9 billion.

As a result of the data revision performed simultaneously with the quarterly data release, the current account deficit increased retrospectively compared to the previous data releases: on the one hand, the HCSO performed a downward revision in the external trade surplus, while the income of foreign-owned corporations operating in Hungary exceeded the previous estimate. In parallel with the latter, non-residents’ reinvested earnings increased, and thus the volume of net FDI inflow exceeded EUR 2 billion in 2020.