HUNGARY - Analysts less optimistics about the GDP growth in the following quarters

18 August 2011 — Daniela GHETU
A recent survey runned by Portfolio.hu among some of the most reputed Hungarian financial analysts showed less optimistic estimates with regard to the 2011 and 2012 growth of the Hungarian economy. The analysts have lowered their GDP forecasts for Hungary both for this year and 2012, as a result of the swiftly deteriorating external economic environment and the local growth that has not even started yet. The consensus estimate shows a 2.3% year-on-year output increase for the second quarter of 2011, but the projections for later periods have come considerably lower. The market expects Hungary's consumer price index at 3.3% in July, but the deceleration of the economy will rewrite CPI estimates sooner or later.

According to the Hungarian financial journal, several economic data have been released recently that pain an ever gloomier picture on the outlook of Hungarian growth. One of these was the latest report on industrial production which showed that growth has practically evaporated from the sector. And the other one was the preliminary external trade statistics which showed a plummet in the growth rate of exports, the sole engine of growth in the country.

The extreme strengthening of the Swiss franc, the money market freeze and the rising fear of recession on developed markets can provide further impediments to economic growth in Hungary. All these factors left a mark on estimates too. The consensus forecast for Hungary's annual average GDP growth dropped to 2.5% from 2.8% for 2011 and to 2.6% from 3.2% for 2012.

According to the analysts' oppinion, all the short-term business cycle indicators - retail trade, industrial production, new car registrations - showed a decline on a quarterly basis. The only counterbalancing force could be expected from the agriculture's side where an increase in crops is likely. The end of the year could also benefit from the completion of auto industry investments and the start of production. Still, the general trend will be not substially modified, net exports remaining the sole engine of growth. Obviously, global events, which for the time being hold downside risks, will also be determinand for the outlook. A persistently strong Swiss franc could also determine a downsize in the GDP dynamic.

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