18 July 2024
External balance indicators continued to improve in 2024 Q1. Current account balance showed an unprecedented surplus, due in part to lower energy bill and in part to moderate domestic demand. In line with the significant net lending position, the net external debt ratio declined to below 10 per cent. The stock of international reserves surged to over EUR 46 billion by the end of March 2024, thus exceeding the decreasing level of short-term external debt by 15 billion euros, a historical record.
Developments in Hungary’s external balance continued to be favourable in 2024 Q1. The four-quarter foreign trade surplus amounted to over EUR 12 billion, due primarily to the decrease in the energy balance deficit and in gross accumulation. As a result, in the first quarter the surplus on the current account balance exceeded EUR 1.8 billion, setting a record high. The four-quarter current account balance surplus thus rose to 1.3 per cent of GDP, while the economy’s net lending grew to 2.2 per cent of GDP.
The improvement in the external position was driven primarily by a decline in the net borrowing of the general government sector, linked to subdued investment and higher tax revenues. At the same time, private sector financial savings decelerated somewhat, reflecting an upturn in household consumption and a drop in corporate profitability at the beginning of the year.
Consistent with the record-setting current account surplus and continued strong FDI inflows at the beginning of the year, of more than 1.2 billion euros, net external debt declined again to below 10 percent of GDP in early 2024 – after the higher levels of the past year.
The stock of international reserves continued to increase in March 2024, rising by about EUR 5 billion from its historic peak at the end of last year, to EUR 46.4 billion. Meanwhile, the level of short-term external debt decreased to close to EUR 31 billion. Thanks to the favourable development of the two indicators, the international reserves exceeded short-term external debt, which is of particular interest to investors, by an unprecedented amount of more than EUR 15 billion.