We see some downward risks to our C/A forecasts, and upward risks to our EUR/HUF forecasts
The Central Bank published 2Q12 Current Account figures in the morning. The EUR 519mn surplus missed our EUR 620mn forecast, but as the 1Q12 figure was revised down to -7mn from +186mn, the q/q increase was even higher than we had expected. Most items of the C/A balance changed in the same direction we had anticipated. The surplus at the trade of goods surpassed EUR 1.3bn, where we expected a smaller figure. However, the improvement in the balance of services was somewhat below our expectations (came in a bit below EUR 0.9mn). As expected, the income balance deteriorated q/q notably, and reached EUR -1.7bn. As assumed, current transfers came in the black, but was below EUR 0.1bn. Direct investment in Hungary came in at somewhat below EUR 1.1bn, but net investment (including investment from Hungary to abroad) came in the red (EUR -0.6bn).
The CB made strong revisions to earlier figures, and not just for 1Q12. The FY2011 C/A surplus was revised down to around EUR 0.9bn, from EUR 1.4bn earlier. As the pressure on Hungary’s export partners’ markets may continue in 2H12, we now see considerable downward risks to our EUR 2.6bn forecast for this year’s C/A surplus. On the other hand, the net external financing capacity (C/A + Capital Account) of Hungary should continue to be strongly positive. The financing capacity was almost EUR 1bn in 2Q12 (EUR 1.3bn since the beginning of this year). According to the central bank, the seasonally adjusted net financing capacity was 3.6% of GDP in 2Q12, the highest on record.
Overall, due the downward revisions in the C/A balance and risks to our own C/A forecast, the stronger than expected rate cuts recently and the question marks around the credibility of the central bank, we see upward risks to our EUR/HUF forecasts (282.5 for the end of 2012 and 275 for the end of next year).