Mixed feelings caused by the July BOP data, once again

HUNGARY - In Brief 18 Sep 2023 by Istvan Racz

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The preliminary July BOP data has been reported. To make it user-friendly, we are presenting below a table with the key items in ratio-to-GDP terms below, for the first seven months of 2022 and 2023, and also for H1 2023. This format should allow the reader to see what important changes have taken place compared to last year and in the latest month alone (sources: MNB, KSH and our own estimates): At first glance, the new figures seem to reflect improvement in July. More or less all the key balances remained unchanged from H1, except for net FDI flows, which corrected in the right direction after a substantial minus in the first half of this year. The current account seems to be fully balanced, the errors and omissions deficit may be expected to get lower when the final Q2 data is reported on September 26, and the cumulative basic balance deficit fell in July, as a result of the smaller negative net FDI flows data in January-July, than in H1. Not great in every respect, but improving, isn't it? In year-on-year comparison, the improvement is even easier to see on the trade balance and the current account, the latter despite a higher deficit on investment income, which we find quite natural and relatively non-disturbing. We would also reserve comments for errors and omissions until the final Q2 data gets reported, except that we find somewhat worrying that essentially no-one cares to spot the tendency of repeated substantial deficits on that line. What we find somewhat disturbing here is the turn of FDI into a net outflow so far this year. This marks a combination of less new inward investment, higher profit repatriation (more accurately less of reinvested earnings), and ...