In the second quarter of 2012 Hungary could not detach itself from negative international economic tendencies either. After growth of 1.7 per cent in 2011, which was a high figure even in Europe, in the second quarter of 2012 according to adjusted data GDP declined by 1 per cent. This decline is smaller compared to the previous quarter (unadjusted data signal contraction of 1.2 per cent) – the Hungarian Central Statistical Office (KSH) reported earlier this morning in its release. According to that, about half of the sectors of national economy stagnated. The performance of information and communication sectors increased, whereas that of construction declined significantly.

These data cannot be considered surprising, as for this year the government had anticipated significantly worse tendencies than in last year. The primary reason of this lies in the temporarily lacklustre performance of the formerly exceptionally robust industrial sector, which is a consequence of the global economic slowdown.

Another negative factor can be agricultural output which is weaker in comparison to last year. Weather conditions unfavourable for the sector also played a role in this result after the most spectacular growth of the past couple of years was recorded last year.

According to the latest data published by the Eurostat, in the second quarter of 2012 both the EU 27 and the euro-zone registered contraction. Compared to the corresponding period of the previous year decline for the former one was 0.2 per cent which is worse than the growth of 0.1 per cent in the previous quarter whereas regarding the latter one the trend had also turned negative as instead of the stagnation of the first quarter there was a decline of 0.4 per cent. It can be therefore concluded that Hungary in this quarter slightly underperformed the EU average regarding annual data, but on a quarterly basis the pace of contraction is in line with the rate of decline in the EU 27 and the euro-zone (-0.2 per cent), consequently Hungary has managed to reduce the gap of the previous quarter.

Hungary is not the only country in the region to be weighed down by the cyclical downturn, annual seasonally adjusted data for the Czech Republic, for example, are more unfavourable (-1.2 per cent) than those of Hungary (-1 per cent), but several large member states of the euro-zone, as of the EU 27 put also up a weaker performance than Hungary (e.g. Italy and Portugal contracted by far more than 2 per cent, while Spain’s performance declined by 1 per cent on an annual basis). This trend in a quarterly comparison appears even more evident.

Having recognized that international economic conditions had deteriorated, the government put measures in place in order to counter the slowdown. In Hungary, general government debt declined by the greatest extent in the past two years which was the consequence of an increasingly balanced fiscal policy which has been sound even from a European perspective and which will secure improvement in the future as well. Crucial regulations have also been introduced in the field of employment which made the Hungarian labour market noticeably more flexible.

The impacts of these changes have already been reflected in the recently published Hungarian data. According to them, in Hungary the number of employed between April and June was 3 million 876 thousand as the three-month average which was the highest figure of the past couple of years.

Furthermore, from next year on, gradual economic improvement can be expected: several large-scale industrial investments will start operating or reach their planned output level which will appear both in production and exports.

(Ministry for National Economy)