Optimistic report on the economic perspectives of the near future

Summer data indicate a moderate improvement in the situation of the world economy and Hungary: the most painful part of the crisis is over. However, the extent and length of this improvement is not known yet – states GKI’s latest report. GDP in Hungary was 6.4 percent lower in the first half of 2009 (EU: 4.8 percent decrease), compared to the same period a year before; in the fourth quarter a slight growth is expected. The Baltic States fell by 15-20 percent, while the GDP of our main export market, Germany decreased by 6 percent. Inflation is at 4.4 percent on an annual level, at the end of the year it will be around 6 percent. In the second half of the year, the exchange rate of our national currency will stay around HUF 270. Operating profits by enterprises will diminish by 10 percent. In 2009, the state budget’s revenues from taxes and contributions will be HUF 750 billion lower than planned in the original budget. Expenditures by the state budget will be HUF 400 billion lower than stated in the budget law. State deficit will be as targeted: 3.9 percent. What follows now is the third phase of the world economic crisis, which leads to reaching the pre-crisis GDP level. In the developed countries, it is not estimated to happen sooner than 2012. GKI’s business confidence indicator has been on the increase since the nadir of April 2009, in August slightly surpassing last November’s level. Hungary’s economic development in 2010 largely depends on the worldwide consolidation process. Nevertheless, our national economy is also vastly influenced by the government’s measures and the so far unknown economic policy of the new government after the 2010 elections. A radically different economic policy, in terms of its macroeconomic effects, probably cannot be kept up in the long run. In 2010, EU member states may restart outsourcing a pat of their production facilities to more competitive member states, for instance to Hungary. A strengthening regional economic cooperation and opening toward third country markets are also expected to give momentum to our economy. Gross public debt was 73 percent of the GDP at the end of 2008 – at the end of 2009 it will be up to 80 percent. Our foreign trade surplus will shrink to EUR 3 billion in 2010, but net EU funding will be up (from EUR 2.5 billion in 2009) to EUR 3.4 billion. The Hungarian economy will stagnate in 2010. Consumption will not change drastically, gross wages will grow by 1 percent, while net wages will be 7-7.5 percent higher, due to changes in the personal income tax system. It will be easier to take out loans, but citizens will remain reluctant to use this opportunity. The unemployment rate will be 9.8 percent.