• 4Q12 C/A surplus amounted to EUR 242mn

  • The seasonally adjusted net financing capacity of Hungary reached 5.1% of GDP in 4Q12

  • Figures on the financing side of the balance basically show the continuation of the deleveraging process

  • The forint is unlikely to strongly benefit from the favorable external balance situation in the short run

Forint is unlikely to strongly capitalize on the favourable external balance situation in the short run, due to lower rates, uncertainties around the monetary policy and less-supportive external market environment

Central Bank published 4Q12 C/A balance figures this morning. The surplus on the balance amounted to EUR 242mn, taking the cumulative C/A surplus for FY 2012 to EUR 1.61bn (1.6% of GDP). The 4Q surplus proved somewhat higher than our EUR 150mn forecast. The surplus on the balance of trade of goods amounted to EUR 711mn in 4Q. Compared to the same period of the previous year, both exports and imports showed only a minimal increase in euro terms, 0.7% and 0.4% respectively, reflecting narrowing room of export-based growth, seen in the last quarter of 2012. This is expected to somewhat improve in 1Q13, mainly based on the performance of car-makers. The surplus on the services balance was EUR 665mn, while the deficit on the income balance was EUR 1.67bn. The latter proved a bit higher than our expectation.


The capital account (most of the EU transfers are booked here) also showed a surplus, which increased to EUR 1.15bn in 4Q12, from EUR 594mn, seen in 3Q12. Thus, the net external financing capacity (C/A +capital account) came in at EUR 1.4bn in the last quarter and EUR 4.3bn in FY 2012, reinforcing the strong external balance position of Hungary. According to the central bank’s calculations, the seasonally adjusted net financing capacity was 5.1% of GDP in 4Q12, 0.4 pps higher than in the previous quarter.


On the financing side of the balance, figures basically show the continuation of the strong deleveraging process that characterises the Hungarian economy, especially in the private sector. This should lead to further improvement in external debt figures, however it cannot be seen as too favourable, regarding short-term growth prospects.


We do not expect strong market reaction from today’s figures. Fundamentally, the strong external balance position suggests appreciation of the forint exchange rate. However, as the positive interest rate differential has considerably declined in the last couple of months, while risk assessment changed negatively, due to uncertainties around future’s guidelines of the monetary policy and less-supportive external market environment, the forint is unlikely to strongly capitalize on good figures in the short run. The strong C/A balance situation, however, should keep a lid on any weakening process of the forint exchange rate in the mid-term horizon.