5. Income, financial processes, equilibrium
5.5 External equilibrium
The current account deficit amounted in April to EUR 1,070 million, by some EUR 300 million more than a year before. The month’s deterioration is a result primarily of the deterioration of the foreign trade balance. This is caused by the second month of outstanding growth of imports. For businesses (primarily those in duty free zones) effected substantial duty free import advance purchases (or purchases under preferential tariff rates) prior to EU accession both in March and in April. One favourable sign is, however, that the monthly deterioration of services seems to have stopped in April.
Outstanding imports in April increased current account deficit
In the first four months a total of EUR 2,826 million net expenditure surplus was recorded, EUR 562 million more than in the corresponding period of 2003. Some 40 % of the deterioration of the current balance resulted form the unfavourable performance of services this year and some 30 % results form the deterioration of the foreign trade balance for the high imports of the last two months turned the more favourable position in comparison to the basis into deterioration.
Owing to real economy the external equilibrium deteriorated in the first four months
Besides the dynamic (14%) growth of exports the transitional outstanding growth of imports during the past two months lead to an almost EUR 1.2 billion foreign trade deficit, which was by 163 million more than a year ago. Along with the decline of the dynamic of consumption the corrective effects of the advanced imports are expected to materialise during the next months which should also reduce the growth rate of imports in relative terms. In this way foreign trade
Deficit was increased primarily owing to advanced imports
Corporate sector net financing
-200,0 -100,0 0,0 100,0 200,0 300,0 400,0
2003. Q1 Q2 Q3 Q4 2004.Q1
HUF billion
Financing from domestic banks Cross-border financing State securities and investm. bonds Total financing
processes may improve not only structurally but also from the aspect of the external equilibrium.
The unfavourable performance of services in the first quarter could not be offset by the performance in April but the continued deterioration has been stopped. Accordingly, the net deficit of services amounted to EUR 400 million, by EUR 246 million more than last year. Along with an almost 6 % growth of export revenues import expenditures increased by 16 % Within this, the surplus of tourism was EUR 126 million, half of last year’s figure, but the deterioration seems to come to an end here too.
The dynamic of the decline of exports slowed down and the growth rate of imports also declined. Although the deficit of other services increased by EUR 120 million to EUR 535 million, export accelerated by the end of April so much (14 %) that despite the growth of the dynamic of imports the gap between exports and imports shrank to -3.6 %.
The deteriorating trend of services seems to come to a halt
The net income outflow amounted to EUR 1.42 billion at the end of April, 120 million more than a year ago. Some 76 % of the net outflow is income flow relating to net income of non debt creating financing (profit transfer and reinvested earnings) equalling last year’s figure more or less.
Almost 60 % of the position deterioration of the net income outflows relates to the increase of net incomes for debt creating, i.e. net interest expenditures. This is not surprising in view of the increased debt portfolio and the relatively high ratio of the debt denominated in HUF, owing to the high HUF rates.
The active balance of unrequited transfers amounted at end-April to EUR 186 million, EUR 33 million below the figure recorded at the end of April last year.
Share of debt creating transfers increasing within incomes
The influx of foreign direct investment has continued to grow. In contrast to the decline last year, in April a total of EUR 180 million net influx of foreign direct investment was recorded, thus the non-debt creating net capital influx in the first four months amounted to EUR 1,042 million in contrast to the EUR 453 million last year. The EUR 589 million increment was a result of the influx of EUR 300 more - EUR 930 million - influx of foreign direct investment into Hungary (of which 500 million reinvested income) and the EUR 342 million of portfolio investment was also EUR 130 million up on the prior year’s figure. The lower level of placements abroad by residents (EUR 237 million) also had a positive effect. Thus at the end of April the financing part of the current balance deficit which is EUR 560 more than last year was 37 %, or 20 % more than in the basis period.
Non debt creating net capital influx increased in the first four months by 130 %
Considering that part of the growth of the current deficit in March and April is imputed to a one-off, temporary impact (advanced imports prior to EU accession) which may be offset during the year, the projection on the current account deficit needs not be revised. The current account deficit is estimated to come to 8.5 % of GDP, the financing requirement will be lower for through the capital balance the EU transfers will also finance some of the current deficit.
Year 2004 current account deficit estimate attainable
Budapest, 15 June 2004
change from the same period of the previous year, %
2000 2001 2002
I-IV. I-IV. I-IV. 1. 1 - 2 I. 1 - 4 1 - 5 I. I-III. I-IV. 1. 1 - 2 I. 1 - 4 1 - 5
quarter quarter quarter month month quarter month month half of year quarter quarter month month quarter month month
GDP volume 15/ 5.2 3.8 3.5 - - 2.7 - - 2.6 2.7 2.9 - - 4.2 -
-Household consumption 4.8 5.9 9.3 - - 7.2 - - 7.1 7.3 6.5 - - 3.0 -
-Gross fixed capital formation 7.7 5.0 8.0 - - -1.6 - - 0.5 1.9 3.0 - - 18.9 -
-Exports of goods and services 21.0 7.8 3.7 - - 2.6 - - 1.8 3.9 7.2 - - 17.4 -
-Imports of goods and services 19.4 5.1 6.2 - - 4.5 - - 6.3 9.2 10.3 - - 16.6 -
-Volume of retail trade turnover 14/ 2.0 5.4 10.7 12.5 10.4 9.1 10.1 8.9 8.2 8.5 8.5 5.6 4.8 4.9 -
-Volume index of investments 6.5 3.5 5.8 - - -1.2 - - 0.5 2.1 3.1 - - 18.9 -
-Foreign trade turnover 1/: export volume 21.7 7.8 6,8 /12 6.6 2.1 2.8 2.2 1.9 2.0 5.7 9.1 19.8 20.2 19.6 18.6
import volume 20.8 4.0 6,1 /12 2.1 2.3 4.2 5.3 5.9 6.5 9.0 10.1 12.1 13.5 16.7 17.2
-- - - - - - - - - - - -
-Volume of industrial production 18.2 3.6 2.8 6.0 2.5 4.1 3.6 3.8 4.1 5.0 6.4 7.2 9.8 10.8 10,4*
-Volume of construction-installation activities 7.6 8.3 17.8 3.6 -10.5 -17.3 -13.0 -7.9 -3.9 -1.8 0.7 11.4 16.6 19.5 -
-Number of employees (in thousands)
household survey (annual average) 3849.1 3859.5 3870.7 3862.4 3847.5 3859.6 3872.8 3878.5 3891.7 3911.9 3921.9 3884.1 3890.1 3891.5 3889.1
-labour statistics 2/ 2718.1 2720.8 2726.1 2711.1 2718.6 2721.2 2726.8 2732.4 2737.4 2746.2 2752.8 2760.9 2762.3 2766.1 -
-Vacancies (in thousands) 3/ 39.2 37.3 34.0 31.9 37.7 42.7 47.7 50.8 50.8 52.7 44.0 38.2 51.3 56.3 -
-Number of unemployed (in thousands) 3/ 372.0 342.8 344.9 374.3 388.3 386.2 368.6 351.0 336.2 344.7 359.9 388.0 401.7 396.9 -
-Rate of unemployment (household survey, %) 6.4 5.7 5.8 6.6 6.5 6.4 6.3 6.2 6.1 6.0 5.9 6.3 6.2 6.1 6.1
-Consumer price index 9.8 9.2 5.3 4.7 4.6 4.6 4.4 3.6 4.3 4.4 4.7 6.6 7.1 6.8 6.8 7.0
Index of industrial domestic sale prices 14.5 9.4 1.6 3.5 4.3 4.4 4.2 3.9 3.9 4.3 5.0 7.3 7.2 7.2 7.5
-Index of industrial export sale prices 8.5 1.5 -4.5 -3.1 -2.7 -2.4 -2.4 -2.6 -2.0 -0.8 0.3 3.9 3.1 2.1 1.9
-Agricultural production prices 22.5 4.9 -1.1 6.2 -0.5 0.3 -0.5 -1.0 -0.4 3.2 5.3 14.4 14.9 14.5 13.5
-Competitiveness 10/
based on manufacturing prices -5.3 -9.0 -7.9 -6.2 -5.5 -5.2 -4.6 -4.3 -3.3 -2.0 -0.9 2.9 2.0 0.6 -
-based on CPI -1.6 -7.6 -9.1 -6.4 -5.4 -5.4 -5.0 -5.0 -3.9 -2.5 -1.3 2.5 1.1 -0.4 -
-based on ULC (value added) -2.8 -8.0 -9.1 - . -6.5 . . -4.5 -2.1 0.3 . . . . .
2003 2004
change from the same period of the previous year, %
2000. 2001. 2002.
I-IV. I-IV. I-IV. 1. 1 - 2 I. 1 - 4 1 - 5 I. I-III. I-IV. 1. 1 - 2 I. 1 - 4 1 - 5
quarter quarter quarter month month quarter month month half of year quarter quarter month month quarter month month
Average earnings: gross 13.5 18.0 18.3 20.9 17.1 15.2 14.8 14.3 14.1 13.5 12.0 8.0 8.4 9.4 -
-net 11.4 16.2 19.6 23.4 20.7 19.1 18.8 18.3 18.1 17.0 14.3 6.9 7.2 8.0 -
-Household savings (HUF billion) 1049.9 1145.4 1196.8 - - 193.2 - - 653.2 707.9 1208.1 - - - -
-credits (HUF billion) 245.4 391.8 769.9 - - 196.2 - - 508.8 838.5 1166.1 - - - -
-General government GFS balance (HUF million) 4/ -480.2 -444.0 -1685.6 -44.4 -207.4 -281.4 -399.9 -408.7 -601.1 -809.4 -1054.3 -218.6 -341.3 -434.7 -547.6 -722.4
Central budget GFS balance (HUF billion) 4/ -368.7 -402.9 -1469.6 -12.9 -140.8 -224.0 -275.6 -252.9 -458.6 -588.6 -727.9 -173.9 -246.7 -364.9 -426.9 -508.8
primary balance (HUF billion) 329.7 212.7 -832.0 23.3 -31.5 -70.3 -39.2 27.3 -89.5 -69.8 0.6 -141.5 -108.7 -186.3 -141.2 -169.0
revenue change 4/ 14.2 10.5 7.1 23.9 14.1 10.0 11.5 12.6 11.3 12.9 13.0 -11.7 5.5 8.1 7.3 5.8
expenditure change 4/ 13.7 10.4 30.4 10.5 11.3 11.6 12.0 9.5 13.7 13.4 -3.2 20.7 16.4 17.3 17.0 16.9
Social Security Funds 5/: balance -81.4 -28.8 -100.9 -42.1 -87.7 -79.4 -147.7 -180.9 -169.4 -256.2 -345.2 -58.8 -115.3 -91.3 -146.5 -236.2
revenue change 10.7 18.6 17.2 13.0 12.8 20.5 16.3 14.5 16.7 15.1 4.8 4.3 4.1 8.5 8.8 8.5
expenditure change 12.5 14.9 20.4 23.6 21.9 21.0 22.7 17.0 16.5 13.0 14.4 10.1 9.0 9.2 7.2 11.9
Government paper benchmark yielos (average annual) 6/
3 month 11.80 9.80 8.24 6.75 5.48 6.27 6.38 6.37 7.63 9.41 12.16 12.21 12.58 12.10 11.58 11.35
12 month 11.57 9.21 7.95 6.51 6.20 6.58 6.46 6.31 8.12 8.87 12.03 11.85 12.49 11.20 10.68 10.67
3 year-bonds 10.74 8.17 7.37 6.88 6.84 6.64 6.50 6.29 7.86 7.97 10.16 10.29 11.16 10.36 9.71 10.12
5 year-bonds 9.11 7.72 7.00 6.74 6.54 6.74 6.36 5.98 6.51 7.87 9.27 9.23 9.91 9.34 9.14 9.46
10 year-bonds 9.04 7.06 6.44 6.51 6.42 6.50 6.31 5.95 6.08 7.22 8.02 8.13 8.75 8.22 8.19 8.44
15 year-bonds 6.68 - 6.34 - 6.34 6.23 - 6.51 - - - 8.21 - 7.44 8.04
Interest rates 6, 7/: - - - - - - - - - - - - -
-with maturity less than a year credit 12.8 11.2 9.7 8.3 7.0 8.2 8.23 7.96 8.7 10.5 13.4 13.5 13.6 13.5 -
-deposit 9.5 8.4 7.4 5.5 3.9 5.1 5.42 5.43 6.6 8.4 11.0 11.1 11.1 11.2 -
-with maturity more than a year credit 13.4 11.2 9.7 9.5 9.7 9.4 8.06 7.80 9.5 10.4 13.0 13.8 13.9 13.5 -
-deposit 9.4 7.7 8.0 5.1 4.7 5.1 5.36 5.29 6.8 8.6 10.8 11.1 8.5 10.9 -
-Increase of money supply 8/ 12.9 17.2 18.9 10.9 13.0 12.9 12.1 13.5 20.6 19.3 10.1 15.7 8.4 5.5 13.4
-Current account of balance of payments (mEUR) old methodology -4380 -3613 -4900 -444 -1112 -1488 -2264 -2707 -3285 -4703 -6488 -445* -1167* -1756* -2826*
Without reinvested earnings -3309 -2085 -3018 -245 -719 -964 -1722 -2653 -2977 -3599 -4520 -254* -783* -1245* -2323*
-Net foreign debt denominated in foreing currencies (bEUR) old meth.9/ 7.4 4.5 5.6 - - 6.0 - - 6.5 7.2 8.2 - - - -
-BUX index 3/ 7865 7122 7739 7486 7212 7423 8116 8337 7782 8930 9627 10064 10242 10992 11072 11285
2003 2004
Signs: * Preliminary data; . : data is not available yet; - : no data for the period
1/ Including industrial customs free zones. The Statistical Office price indexes are published quarterly;
the volumes for other periods are calculated with estimated price indexes.
2/ Data for firms with more than 5 employees and for budgetary institutions total.
3/ End of period data.
4/ Excluding privatization receipts. At the general government the interim data do not include the local governments.
5/ Total revenues and expenditures of the Pension Fund and Health Fund are not consolidated with the non-self-provided services.
6/ The yield or interest in the last month of the period.
7/ At deposits with maturity longer than a month but not longer than a year.
8/ M3 does not include deposits with an agreed maturity over 2 years and debt securities with over 2 years' agreed maturity issued by motetary financial institutions. However, it includes holdings by residents other than monetary financial institutions of MNB bonds with up to 2 years' agreed maturity plus holdings by residents other than monetary financial institutions of investment units issued by money market funds.
9/ Excluding intercompany loans
10/ Price based indicators seasonally non-adjusted, unit labour cost based indicators seasonally adjusted 11/ As a consequence of correction of short term credits the net foreign debt has changed.
12/ There is a change in the statistical methodology from December 2002, therefore the CSO corrected only the annual volume indices.
According to the CSO publication exports went up by 5,9 % while imports increased by 5,1 % in 2002.
13/ Without part-time employees
14/Including sales of motor vehicles and antomative fuel