Hungarian foreign trade surplus narrows in December 2017, trade balance to deteriorate in 2018

Hungarian foreign trade surplus narrowed at the end of last year. The nation’s trade surplus came in at EUR502 million in December, letting the full year balance accumulated to EUR 8.2 billion or 6.9 percent of GDP in 2017. It is a slight deterioration from the historic peak of EUR 9.7 billion in 2016; however, in volume terms, the last year was more robust both on export and import side, noted KBC Market Research in a research report.

Thus worsening does not reflect the deterioration of economic environment, rather the opposite. The household consumption and the investment rose in 2017 reflecting the stronger sentiment both in household and business sector and as these are import intensive, the import growth simply surpassed the export growth.

Meanwhile, the January budget figure emphasizes that the government bumps money into the economy as it heavily pre-finances the EU funds projects and as result leaving the January deficit to HUF 193 billion. Positive news is that the revenue side continues to be robust as the employment rate is high and the tax collection is more effective. Thus, the 2.4 percent of GDP budget deficit target could be achieved in 2018. But taking very positive growth environment into account, the fiscal policy appears to be too expansive.

“As a result the trade balance may deteriorate further in 2018, which also means less appreciation pressure on the HUF in medium term”, stated KBC Market Research.

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