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Hungary Business Forecast Report Q2 2010Published by: Business Monitor International Published: Feb. 5, 2010 - 70 Pages Table of Contents
AbstractHungary’s medium-term outlook remains weak, and we hold to our forecast for real GDP to expandby only 0.1% in 2010 accordingly. Indeed, the Q210 Hungary Business Forecast Report paints arelatively bleak picture on the health of the Hungarian economy going forward, which we expectto underperform through the end of our five year forecast period. In particular, we caution thatgiven the private sector’s still large overhang of FX-denominated debt, a fundamental domesticdemand-led recovery is not yet in the offing. With government spending inherently constrainedas a result of the country’s EUR20bn IMF Stand-By Arrangement, the onus for driving growth hasfallen on the export sector, which is particularly unfortunate at this juncture given the still weakregional growth outlook.With the Hungarian Civic Union (Fidesz) polling at 68% of decided voters as of October (approximately35% of all voters) the odds that the centre-right party will secure a relatively strong majoritygovernment in April’s parliamentary elections continue to increase. Going forward, we stress thatHungary’s political risk profile would improve considerably should Fidesz secure a robust mandatein next year’s election, particularly as such a scenario will act as a considerable boost to thegovernment’s ability to form and pass a coherent policy agenda through the medium term. Moreimportantly, perhaps, we do not believe the party will stray significantly from the current coalitiongovernment’s economic policies once in power, and maintain that current discussions over gapingfiscal shortfalls next year is more a product of political posturing than anything else. Latest balance of payments data from the National Bank of Hungary reaffirm that a huge correctionto the country’s external asymmetries is underway, with the current account posting a surplus ofEUR698mn in the third quarter of 2009. Importantly, we note that at the same time that Hungary’scurrent account has flipped into surplus, this has not been met by a parallel collapse in the financialaccount. Although gross FDI and portfolio inflows have slowed, resulting in the two componentsposting deficits of EUR1.1bn and EUR1.2bn respectively through Q309 (compared with surplusesof EUR1.2bn and EUR2.0bn through the same period in 2008), this has been more than offset bya surge in ‘other investment’ inflows. We project the current account posting a surplus of 1.5% ofGDP by end-2010, compared with a deficit of 8.5% in 2008. D espite being in its third straight year of contraction, Hungary’s construction sector is still showingsome signs of life. BMI forecasts that the sector will return to marginal growth in 2010 after bottomingout in 2009 and posting a decline of 11.3%. However, growth will hardly be impressive overthe forecast period, with the sector reaching just HUF1,163bn (US$5.9bn) in 2014, representinga compound annual growth rate (CAGR) of 2.07%. To be sure, with government expendituresexpected to remain low in light of the country’s IMF-imposed fiscal deficit ceiling, we also believelarge-scale publicly funded infrastructure projects will be minimal over the next several quarters,thereby minimising the sector’s growth potential going forward. Get Full Details About This Report >> |
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