22 April 2024
In 2023, Hungary’s current account balance showed a record improvement, and registered an annual surplus. The external balance improved markedly by European standards, partly owing to the improvement in the terms of trade and the adjustment in domestic demand. Net and gross external debt ratios remained low. At the end of 2023, international reserves reached a historical peak, well above the level of short-term external debt.
Accompanied by declining energy prices and weak domestic demand, the external balance indicators of the Hungarian economy improved significantly in 2023. The current account balance-to-GDP ratio rose by more than 8 percentage points in 2023, which is unprecedented and a particularly marked increase even by EU standards, mainly due to a trade surplus of over EUR 10 billion. This resulted in an annual surplus of 0.2 percent, with the economy’s net lending increasing to 1.2 percent of GDP.
The improvement in the external position was made possible by rising private sector financial savings, similarly to other countries of the region. By the end of 2023, net lending of households rose to a high level, while net borrowing of the corporate sector fell significantly. The four-quarter general government deficit narrowed slightly at the end of the year, but remained historically high, still above the levels typical in the Visegrád countries.
Due to the contraction in net borrowing, net external debt rose only moderately during 2023, remaining below 12 percent, close to its historic low. At the end of 2023, international reserves rose to an all-time high of EUR 41.4 billion, exceeding the level of short-term external debt – an indicator closely monitored by investors – significantly, by EUR 7.7 billion.