Hungary posted a €1.129 billion ($1.26 billion) foreign trade surplus in June, which is the biggest on record. It is unclear, though, whether this is good news from a growth perspective or not.
The surplus of over €1.1 billion is 10% larger than the second-biggest surplus. The Central Statistical Office reported €1.01 billion surplus last March, and the surplus had never before or since exceeded the €1 billion mark until now. Surplus in the first half reached €5.3 billion, which is also an all-time high, Portfolio reported.
There are two reasons for this gargantuan surplus. The first is that exports grew by 5% year on year in June. Exports palpably stepped on it in Q2, which is likely due to a correction of intermissions in vehicle production in early 2016.
It is interesting, though, how hectically industry performs. The latest IP data released by the stats office today were fairly poor, but this was still enough for exports to grow. From a growth perspective this raises the possibility that export growth was achieved partly from inventories therefore it did not necessarily make a significant impact on second quarter GDP.
The second reason behind the big trade surplus is imports which have been stagnating for a year now. The key factor behind this is the fall in energy prices, particularly the lower oil bill. A barrel of crude cost more than $70 in the middle of 2015, whereas we are down at $50 now. At the same time, consumption is smaller during the summer therefore it would not be absolutely certain that stagnating imports are exclusively linked to the world market price of commodities.
If the import demand of the economy fails to increase even when consumption and exports grow “we should be concerned that it may be investments that are faring poorly. This was already expected in view of diminishing EU funding, the only question is the severity of the situation,” the office said.
Overall, the huge trade surplus will boost the current account surplus and it will further the dynamic reduction of national economy debt.
