The foreign merchandise trade surplus amounted to EUR558m in March and declined by 32.1% y/y, the statistical office (KSH) reported preliminary figures. On a cumulative basis, the surplus reached EUR2,097bn in Q1 and fell by 2.5% y/y as the March decline erased the gains from the previous two months.
Both imports and exports declined y/y in March but the export decline was stronger, which explained the deterioration of the trade surplus. Exports fell by 3.8% y/y, which we ascribe to a combination of volume and price effects judging by the contraction of industrial output during the month. We believe that the weak export performance in March might be due to some continued restructuring at the local car industry. We therefore think that it might be temporary and the current strength of the Eurozone economies should continue to support export growth in the next months.
Imports fell by 1.1% y/y in March compared to the 4.8% y/y growth in the previous month. We attribute the lower imports to the contraction in export-oriented production during the month. Otherwise, we think that underlying domestic demand has remained strong and we also expect higher energy imports in March due to the colder weather conditions. High domestic demand and rising global commodity prices should keep nominal import growth above the export growth in the next months, in our view.