Dynamics of the trade balance and developments in exports and imports

This article examines how the trade balance (or net exports) changed during the crisis. In the early-to-mid-2000s, Hungary ran a trade deficit as external indebtedness grew. Since the crisis, balance sheet adjustments by economic agents have substantially reduced imports for consumption and investment purposes, whereas exports (and imports of interim products) grew during the same period. As a result, the trade balance moved into a large surplus. However, in this fifth year of the crisis, exports still remain below their pre-crisis levels, due not only to cyclical factors, but also potentially to long-term, structural reasons. To reduce external debt in the medium term, export-led growth will be required, which may come from faster growth on Hungary’s export markets, an increase in market share or higher domestic value added of exports. Our analysis has identified challenges in all three areas.