Budapest, 29 April 2022 – During 2021, developments in the external balance indicators of the Hungarian economy were characterised by dichotomy: primarily as a result of temporary factors, the improvement that took place in H1 was followed by a drop in external balance indicators. At end-2021, the net external debt ratio of the economy declined to 7.3 per cent, i.e. close to the historical low observed a year earlier. Following a major increase, international reserves, which amount to more than EUR 38 billion, continue to significantly exceed the expected level.
In 2021, Hungary’s current account showed a deficit of 3.1 per cent of GDP and a low net borrowing. Last year’s decrease in external balance indicators, the degree of which was similar to those seen in other countries of the region, is primarily attributable to a decline in the goods balance (in view of a shortage of semiconductors and the surging energy prices), and therefore it is expected to be only a temporary phenomenon. Continuous improvement in the services balance and the still significant absorption of EU transfers improved the external balance position of the economy.
The decline in net lending was mainly related to the fall in corporations’ financial savings (primarily due to inventory accumulation), while the general government balance improved as a result of an expansion in tax revenues in view of the upswing in the economy. Households’ strong demand for government securities played a major role in the further decrease in the foreign share within the declining government debt-to-GDP ratio, as stable domestic purchases reduced external vulnerability.
Net FDI inflows continued in 2021 as well, which was the result of major increases in foreigners’ investments in Hungary and Hungarian investments abroad. Net debt liabilities rose primarily in relation to the government, but as a result of revaluation and a major expansion in nominal GDP, at the end of the year the net external debt ratio stood at 7.3 per cent, i.e. close the historical low. With a significant increase in foreign exchange reserves, exceeding EUR 38 billion at end-2021, the reserves continue to be significantly (i.e. by EUR 11.7 billion) higher than the level expected by investors.