A surplus of 600 million euros was achieved on the current and capital account of the balance of payments in the second quarter of 2023.

A surplus of 600 million euros was achieved on the current and capital account of the balance of payments in the second quarter of 2023, which is 1.5 billion euros more favorable than in the same period of the previous year, according to the new HNB Commentary on the balance of payments, the state of gross foreign debt, and the state of international investments for the second quarter of 2023.

This was primarily contributed by transactions with the EU budget, namely a strong increase in the overall surplus on secondary income accounts and capital transactions (by one billion euros) due to record disbursements of funds to end users from EU funds.

Namely, excellent absorption is mainly related to the fact that the last day of June 2023 was the deadline for the disbursement of remaining funds for earthquake recovery from the European Solidarity Fund. In addition, favorable developments were also contributed by the increase in the surplus on the primary income account, which largely reflects higher disbursements of direct support in domestic agriculture at the expense of the EU budget.

In addition to EU funds, the improvement in the balance on the current and capital account was contributed by an increase in net exports of services, primarily due to strong growth in tourism revenues. In contrast, the deficit in trade with foreign countries increased alongside a simultaneous decrease in merchandise exports and imports on an annual basis. Observing the last four quarters, the cumulative surplus on the current and capital account in the period up to the end of June 2023 amounted to 2.6 percent of GDP, which is 3 percentage points higher than the recorded balance for the entire year of 2022.

The state of gross foreign debt at the end of June 2023 amounted to 56.5 billion euros or 79.4 percent of GDP, which is 300 million euros or 2.6 percent of GDP less than at the end of March 2023, primarily due to the reduction of the central bank’s and general government’s debt accompanied by growth in nominal GDP.

Net foreign debt slightly decreased during the second quarter of 2023 (by 200 million euros), primarily due to seasonal improvement in the net foreign position of banks. Thus, the net foreign debt at the end of June 2023 amounted to 1.5 billion euros or 2.1 percent of GDP compared to an achievement of 1.6 billion euros or 2.4 percent of GDP at the end of March 2023.

With the reduction of net ownership obligations, the slight decline in net foreign debt was also reflected in the state of net international investments, which improved only slightly from -18.5 billion euros at the end of March 2023 to -18.1 billion euros at the end of June. Accordingly, the relative indicator of the state of net international investments improved from -26.7 percent of GDP, which it was at the end of March 2023, to -25.5 percent of GDP at the end of June.