Waiting for the nadir

According to economic projections by GKI Gazdaságkutató Zrt. and Erste Bank, the worse is yet to come for the Hungarian economy, with GDP expected to decrease to 6.5 percent. Agriculture and export sensitive industries will suffer the biggest losses. Industrial recession slowed down by spring 2009 and in May a 2.6 percent production growth was measured. In Hungary’s construction sector the volume of production continued to fall (by 3.3 percent compared to April). The number of contracts signed surpasses last year’s data by 26 percent, projecting production growth – but this process will not take off before 2010 (and even then rather in civil engineering). Retail sales are expected to reduce further from July, real wages decreased by 2.2 percent in the first five months; unemployment is on the rise and the urge to save is increasing. Budget deficit was 0.9 percent of the GDP in June, projection for 2009 is 3.8 percent. In the first five months the fallback in import was bigger than in export and this process is predicted to continue throughout the year, resulting in an annual trade surplus of about HUF 2.8 billion (3.1 percent of the GDP). The inflation rate is expected to be 5 percent and more interest rate cuts are projected until the end of the year.