Shrinking deficit, slow growth

According to a forecast by GKI Gazdaságkutató Zrt. and Erste Bank, both the external and internal balance of the Hungarian economy will show more than expected improvement this year, but growth will be slowed down very significantly and inflation is going to stay high. Most sectors of the economy performed modestly in September, compared to earlier periods. The growth of export also slowed down. Data for the 1st-3rd quarters shows an increase of 17 per cent in industrial export. Though production of the food industry has dropped, food export shows an increase. Retail sales of food has dropped by 1 per cent, while the retail sales of other categories show a decline of 4 per cent. GDP was only up by 1 per cent in the 3rd quarter of the year, compared to a year earlier. The deficit of the budget is to fall to 6 per cent of the GDP this year. One half of the 3 per cent improvement is due to the increase in revenues, while the other half comes from cuts in public spending. The deficit of the balance of foreign trade has dropped from EUR 2 billion last year, to EUR 0,4 billion in the 1st-3rd quarter period. .A significant surplus is expected by the end of the year for the overall balance of international payments. Inflation peaked at a higher than expected level in the spring of 2007 and it has been falling at a slower than expected rate since then. Real incomes show a nominal decrease of 4,5 per cent, but the actual figure is 6 per cent as the result of the “whitening” of the economy. Household consumption will show a 2 per cent drop.