Tuesday 30 June 2009

UPDATE: Hungary's Curr Acct Deficit Narrows Sharply In 1Q

UPDATE: Hungary's Curr Acct Deficit Narrows Sharply In 1Q
   By Margit Feher

BUDAPEST (Dow Jones)--Hungary's current account deficit narrowed in the first quarter even more than expected by analysts on a rising trade surplus, lower profit repatriations and high European Union financial support, the central bank said Tuesday.

The current account deficit was EUR591 million in the first quarter of this year, narrower sharply from a deficit of EUR1.65 billion a year earlier and a deficit of EUR2.58 billion in the previous quarter, National Bank of Hungary said. That's also lower than the median forecast from six analysts polled by Dow Jones Newswires for a deficit of EUR990 million.

The country's net external financing ability, which is the balance of the current and the capital accounts, posted a surplus in the first quarter for the first time since 1995.

The first-quarter surplus was EUR272 million versus a deficit of EUR862 million a year ago and a deficit of EUR2.52 billion in the previous quarter.

"The surplus was owing to a decline in economic performance... and an extraordinary amount of European Union transfers," the central bank said.

Hungary's gross domestic product is expected by the government to fall nearly 7% this year and analysts expect the 2009 current account deficit to halve from last year's EUR8.9 billion.

Net financial support from the E.U. totaled EUR1.11 billion in the first quarter, with such transfers boosting the current transfers line by EUR244 million, and E.U. support accounted for among the capital transfers totaling a net EUR862 million.

As for the main component of the current account, the trade surplus increased in the first quarter to EUR685 million, from EUR372 million a year earlier and EUR86 million in the previous quarter. Exports fell 14% and imports 21% in the first quarter from the fourth quarter of last year as demand for Hungarian goods declined due to the global recession.

Both debt-related payments and profit repatriations by foreigners on their Hungarian fixed-capital investment fell sharply in the first quarter.

The current account is a key indicator for analysts to judge a country's economic health. Hungary faced huge "twin deficits" - large current account as well as budget deficits a few years ago and financial markets continue to eye both closely. Next to its current account, Hungary's budget has also been improving due to the country's tight fiscal policies.

Central bank Web site: www.mnb.hu

-By Margit Feher, Dow Jones Newswires; +36-20-925-2364; margit.feher@dowjones.com

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(END) Dow Jones Newswires

June 30, 2009 03:18 ET (07:18 GMT)

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