The BOP deteriorated in early 2019

HUNGARY - In Brief 07 May 2019 by Istvan Racz

On April 30, the Monetary Council's communiqué specifically said on the balance of payments: 'In February 2019, the current account balance improved, to which both the stable services balance and the renewed rise of the goods balance contributed.'This, somewhat loosely worded, brief statement was literally correct, yet misleading at the same time. The current account balance indeed improved in February, but only compared to January, the data for which was very poor. In addition, the CAB figure for February also represented a rather sizeable deterioration on year-on-year basis.More specifically, the current account surplus fell in the first two months of this year to EUR 30m (0.1% of GDP) from EUR 1076m (5.2% of GDP) in January-February 2018, according to MNB data. Essentially all key balances worsened: the trade surplus fell to 5% from 8% of GDP, the net factor income deficit grew to 4.1% from 3.8% of GDP, net transfers from the EU dropped to 1.8% from 6.6% of GDP, and so the external income surplus (the CA surplus + net capital transfers, mainly from the EU) shrank to 2.2% from 9.9% of GDP. Adding in the net errors and omissions deficit, the net external financing balance turned into a deficit of 6.6%, from a surplus of 2.5% of GDP, over the same period.The usual footnote to all of this is a warning that figures cited above are all affected by a good deal of seasonality, so the yoy changes are much more important than the levels, and that two-month figures are necessarily subject to a great deal of short-term volatility. But the comparison of like with the like must be still meaningful. Data points to a clear deterioration, which is no surprise at all, as domestic ads...

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