Dwindling pessimism

According to predictions by GKI, made in cooperation with Erste Bank, the Hungarian economy’s performance probably reached its nadir this summer. External balance is radically improving, while internal balance meets international requirements. Summer data on world economy and Hungary indicate increasing business cycle and stock price indexes, and investors are more willing to take risks. Although the GDP reduced by 7.6 percent in the second quarter in Hungary, industry and export showed signs of the decrease slowing down in June. Retail sales also diminished less than expected and the unemployment rate improved a bit. Investment confidence toward Hungary is on the increase, this is reflected by the Forint remaining relatively strong after interest rate cuts in both July and August. Foreign trade balance in the first six months was positive, by EUR 2.1 billion; budget deficit is going to be around 3.8 percent of the GDP. Inflation was up from 3.7 percent in June to 5.1 percent in July. In the first six months, gross average wages improved by 5 percent in the competitive sector; in the budgetary sector they were reduced by 7 percent. Real wages were 2.2 percent lower in the first half of the year than a year before.