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Hungary Business Forecast Report Q4 2012

740.8

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Electronic License

Electronic License

An electronic version (mostly PDF, but can be Excel or PPT), which is either available for immediate download or will be sent via email by the Publisher of the report. The licencing for an electronic version is for use by the purchaser ONLY.

£740.80

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Market

All Sectors

Report Type

Country Guide

Country

Hungary

Published

24 October 2012

Number of Pages

45

Report Delivery

Download

Delivery Lead Time

Immediate

Publisher

Business Monitor International

File Format

PDF

While the deteriorating external macroeconomic picture presents sizeable headwinds to Hungarys trade and investment dynamics, ongoing domestic concerns, specifically tight policy and depressed economic confidence, will mean that Hungary does not avoid recessionary conditions this year. Given the financial pressures still facing Hungary, the severely weakened domestic economy and the governments high stock of debt, we still believe that an IMF/ EU financing deal will be reached before the end of the year.

With progress towards the start of official negotiations continuing steadily, we see a deal by early October as most likely, and this will help to bolster financial market stability. The Hungarian government has made some progress on the fiscal front, but as it stands it is still expected to miss its own deficit target of 2.5% of GDP this year as well as the EUs less severe 3.0% limit. As a result we expect further fiscal consolidation efforts to be outlined before the end of the year, and fiscal and debt dynamics are expected to be major discussion points once official IMF/EU negotiations begin. On the monetary front, while consumer price inflation remains close to double the central banks 3.0% medium-term inflation target, we do not foresee significant inflationary pressures building over the next 18 months due to weak domestic demand dynamics.

We still believe the central bank will have room to cut interest rates once an IMF/EU financial backstop is in place. While an IMF/EU financing arrangement will help safeguard financial market stability for Hungary, specifically helping to lower borrowing costs, it is unlikely to bring about a rapid turnaround in the economy. In turn, we expect public support for the Fidesz administration to continue weakening heading into 2013. While we acknowledge that the political opposition remains fragmented, we believe that growing levels of discontent and political apathy with the established parties could still trigger a shift towards extremist ones.

Major Forecast Changes

Owing to a worse than expected real GDP growth reading in the first quarter of 2012, and a continued deterioration in eurozone dynamics, we have been prompted to revise down our growth forecast for 2012 to -1.2% from -0.5% previously. Given the strong efforts made at fiscal consolidation over the course of the first six months of the year, we have revised down our budget deficit forecast for 2012 to 3.8% from 4.5% previously.

Key Risks To Outlook

Risks to Hungarys growth outlook are firmly to the downside and emanate from at home as well as abroad. On the domestic front, further delays in obtaining an IMF/EU financing arrangement will cause further financial market instability and prompt the central bank to maintain tight monetary policy for longer, in turn endangering any recovery in the domestic economy. On the external front, any further deterioration in the eurozone sovereign debt crisis would have severe knock-on effects on Hungarys growth trajectory given the economys strong trade and investment linkages with the common currency area.

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+44 (0) 203 086 8600

Select License Type

Electronic License

Electronic License

An electronic version (mostly PDF, but can be Excel or PPT), which is either available for immediate download or will be sent via email by the Publisher of the report. The licencing for an electronic version is for use by the purchaser ONLY.

£740.80

Change Currency

GBP EURO USD

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USD

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