Economic policy dilemmas

By: trademagazin Date: 2010. 04. 07. 00:04

According to the forecast of GKI Economic Research Co. prepared in co-operation with Erste Bank in 2010 the Hungarian economy will be close to stagnation, recovery with modest GDP growth is expected only in the second half of the year.

Recovery has started in the world economy, however, its speed is rather uncertain; the recovery process is unstable. The low utilisation of capacities holds investments back, the further deterioration of unemployment – which, at the same time, puts constraints on wage increases – hampers the rise of household consumption. Restructuring has not been finished yet in the European banking sector, confidence did not fully return, therefore credit supply is still limited. Fiscal stimuli cannot continue either, and stopping fiscal expansion and improving the balance is already on the agenda.
The decline has lasted for seven consecutive quarters in Hungary. The annual average drop of GDP was 6.2 per cent in 2009, consumption contracted by 6.7, investments by 6.5 per cent, and inventories were depleted. Industrial production and exports will rise already in the first quarter, however, in that period unemployment will peak and consumption will hit bottom. In the second half of the year, there will be some growth and inflation will be more moderate.



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