The current account generated a EUR56.5m surplus in July, monthly balance of payments data by the National Bank of Hungary (NBH) showed. The surplus was relatively small but it was still an improvement over the EUR10.3m surplus in Jul/2017, according to unrevised NBH data. The higher current account surplus reflected lower merchandise trade gap as well as lower net outflows from the secondary income account. Strong export growth pushed the merchandise trade deficit down y/y, which we think might be partly due to calendar effects and partly, to the depreciation of the forint exchange rate.
The net services surplus narrowed y/y in July due to lower surplus from non-travel services. Net primary income outflows also picked up during the month on the back of higher profit repatriation and lower remittances. EU fund flows in the current account amounted to EUR 70.6mn and contributed to the y/y improvement of the current account surplus. EU funds in the capital account increased visibly y/y to EUR234m in July, in our opinion showing that EU fund reimbursements have not dried up completely as the budget execution data has suggested.
Net financial flows were minimal in July, amounting to HUF57.1m in ingoing direction. These mainly represented the repayment of residents’ FDI-related loans abroad. These inflows were partly offset by standard net lending by local banks to non-residents as well as accumulation of receivables on EU funds.