Excellent fiscal data, yet further BOP deterioration reported for H1 2019

HUNGARY - In Brief 01 Oct 2019 by Istvan Racz

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Both the ESA2010 (accrual terms) general government balance and sectorial financial data for Q2 have been released today. Following indications by partial figures, which were available earlier, that the fiscal balance must have improved quite a lot, this new set of comprehensive data marks a 1.3% of GDP fiscal surplus for H1, against a 1.2% of GDP deficit in H1 2018. Of course, H1 2018 was an election period and thus it was also special: in H1 2017, the surplus was 1% of GDP, so the genuine improvement can be regarded as moderate.Surely, the surplus balance in H1 is kind of a seasonal phenomenon. In rolling 12-month terms, there was a deficit of 1% of GDP in June this year, against one of 3.3% of GDP in June 2018 and 1.4% of GDP in June 2017. So taking out last year as an election-driven outlier once again, a small amount of improvement against the preceding year can be observed.However, the deterioration in the BOP, which we reported for H1 2019 earlier, is still present in the newly released financial accounts data, despite the improvement by the fiscal balance. The reason for that is duly explained by the foregoing chart on the rolling 12-month balances of the various sectors, expressed as % of GDP. This chart suggests that the recent improvement by the fiscal balance was only enough to offset a similar decrease of the otherwise quite high financial savings ratio of domestic households. Simultaneously, non-financial enterprises were moving towards sizeable net borrowing at a rapid pace, and this worked as a mirror image of the deterioration by the financial account in the BOP.By the way, it was exactly the latter trend, i.e. increasing net borrowing by the non-finan...