Positive figures published: this could boost the forint

According to the Central Statistical Office (KSH), in May this year, the value of exports calculated in euros was 5.2 percent higher, while that of imports was 5.4 percent lower than in the same period of the previous year. The foreign product trade balance improved by 1.3 billion euros. Compared to the previous month, the level of foreign trade product turnover increased by 13 percent on the export side and 7.3 percent on the import side. 

Low domestic demand plays key role in drop in imports

In May, the value of exports was 12.9 billion EUR (4,813 billion HUF), and that of imports was 11.8 billion euros (4,410 billion HUF). The product foreign trade surplus was 1.1 billion euros (403 billion HUF). 77 percent of exports and 69 percent of imports were conducted with EU member states. In May of this year, compared to a year earlier, the value of exports in euros increased by 5.2 percent, while that of imports decreased by 5.4 percent, KSH wrote.

“In May, the foreign product trade balance developed favourably, the balance has not been at such a high level since September 2020. So now, the surplus is not only positive but also particularly high,” revealed Makronóm’s analysis. Based on last month’s data, the exchange rate may have improved in May as well, i.e. due to the normalisation of the energy market, the increase in export prices may have exceeded import prices. Taking this into account, the volume of exports may have increased slightly, while that of imports may have decreased more significantly. Therefore, it is unlikely that the weak performance of the industry is caused by exports, where moderate growth is achieved. Low domestic demand  plays a role in the decline in imports.

Current account balance may be on the mend

The current figure is also important because it indicates that the balance of the current account may also improve on an annual basis, writes Index. This is necessary after the significant deterioration that occurred last year due to the high energy prices. In addition, hopefully, this will help the forint exchange rate somewhat after last week’s dramatic weakening. However, in the coming months, as a result of the gradually decreasing inflation, consumption may also pick up. If this occurs, it will also prompt an increase in imports, but in parallel, industry growth is also expected, so the balance does not have to deteriorate yet.

Good news for the forint

In April, the value of exports calculated in euros increased by 3.4 percent, while that of imports decreased by 4.0 percent. With this, the Hungarian foreign trade balance became surplus for the third consecutive month, which can be evaluated as a turnaround after the previous period, which showed a significant deficit. “Despite the unfavourable performance of the industry, exports managed to surge while imports plummeted. In addition to the change in volumes, the improvement in the exchange rate may have played a key role in this”
– evaluated the data, Gábor Regős, the lead analyst of the Makronóm Institute.