In the second quarter of 2012 Hungary’s GDP – matching almost exactly prior expectations – decreased by 1.3 percent compared to the same period of the previous year. Several countries in the EU have similar trends, Italy and Portugal have been in deep recession, while the economy of our regional peer, the Czech Republic, contracted by more than 1 percent according to preliminary data.
From next year on growth prospects are expected to brighten gradually: several large industrial investments will start operating or reach planned capacity utilization levels which will boost both exports and production, and improving external market conditions may also contribute to economic growth.
On the basis of detailed data it can be concluded that on the production side significant sectors slightly contracted in the second quarter of the year. Compared to the previous year, there was significant change in industry and agriculture. Parallel to diminishing export market demand, the basically export-oriented industrial sector registered a small decline of 0.7 percent. The other key change can be observed in agriculture which, due to unfavourable weather conditions, recorded slight contraction after the strong growth of the previous year. Therefore latest data are pushed deep into negative territory by high basis figures.
On the consumption side it can be observed that net exports have still positively contributed to figures. Exports were up 2.1 percent, whereas imports increased only by 0.2 percent. Household consumption has declined marginally, but regarding gross capital formation it continues to record substantial contraction.
Having recognized negative tendencies on external markets, the government continues to work out instruments to fuel growth. In addition to new development schemes and the more efficient utilization of EU resources, production at the Kecskemét plant of Mercedes will also have a positive impact on growth prospects. Problems resulting from the negative external environment will be addressed by active measures such as the Job Protection Action Plan aimed at improving conditions for enterprises.
Furthermore, it has to be noted that it was Hungary where general government debt was reduced to the largest extent in the past two years which result has been and continues to be the consequence of an increasingly balanced fiscal policy which is stable even from a European perspective. Crucial regulatory amendments had been introduced regarding employment as well which made the Hungarian labour market noticeably more flexible. Recently published data already reflect their impact. There have been important changes in the fields of education and innovation policy which will enable Hungary to be one of the countries that can best benefit from the anticipated future upswing in European economic activity which will be complemented by the policy of opening to the East.
(Ministry for National Economy)
