ECOSTAT NEWSLETTER
- February 2002 -
 

During the past month the economic news from the United States of America has been encouraging. The confidence indexes of the European Union also reflect the first signs of an end to the recession. The president of the FED sees no necessity for further cuts in interest rates, and although the ECB might introduce another interest cut at the beginning of the year, from the second half of the year growth can be 'let loose'.

In the last year, the Hungarian economy can be expected to have produced 3.8 percent growth, which sprung from the higher growth rate (4.2%) of the first half of the year, and the probably lower growth rate (by approximately one percentage point) of the second half. Dynamism in the economy can only be anticipated from the second half of 2002, and GDP will rise more slowly than last year.

In consumption, especially general consumption, some slow-down is expected, while at the same time, parallel to a more dynamic economy, an increase in gross fixed asset accumulation is foreseen. All in all, national consumption could exceed last year's performance by 3.9 percent.

This year, the production side will primarily be determined by a visible slowing down of industry in the first half of the year. Industrial productivity greatly depends on the level of exports. A probable slow down of industrial growth in 2002 to a 3.6 percent expansion is to be expected, compared against last year's 4.2 percent. Due to a livening in capital expenditure and planned infrastructural development, the striking growth in the building and construction industry in 2001 (nearly 10%) will presumably continue in 2002, and an expansion of 9.5 percent can be expected. We do not anticipate any significant increase in agricultural output, and growth of 1 percent is to be expected for 2002.

In 2001, the balance of the Hungarian economy did not significantly worsen. The state budget deficit settled at 3.1 percent of GDP, which is somewhat lower than the previous year. If we also take into account items outside the GFS statistics (i.e. MFB and ÁPV) then the deficit was about 1.8 percent higher. In 2002, a slight improvement in the balance can be awaited with an expected deficit of 2.8 percent of  GDP, mostly as a result of an increase in tax income.

The slight improvement in the trade balance within the external balance was affected most by the fall in exports with a high import demand. In the current year, however, a deterioration in the balance has to be accounted for alongside economic growth. The case is similar to that of the current balance of payments where an increase in the corrected deficit for 2001-700 million Euro higher than previously-can be expected. The deficit is expected to reach 1.5 billion Euro. The decrease in direct capital investment will not endanger the external balance and we anticipate a 2.3 billion Euro capital influx in 2002.

Disinflation could be sensed from the second half of the previous year, from a 10.5 percent rise in prices the price index fell to 6.5 percent by December, resulting in an average rise of 9.2 percent in prices in 2001. In the first month of 2002, disinflation has continued, and will presumably continue in the first half of the year. In the second half, however, the increase in demand following economic growth will enable a slower disinflation in prices. All in all, a 5.8 percent price increase can be anticipated for 2002.

The unemployment rate is expected to stay at the current level of 5.7 percent, no significant increase in employment can be anticipated. The high level of income increase, 18 percent in gross income and 6.4 percent in real income, characteristic for 2001 will not continue. In 2002 a 12 percent increase is expected in average income, and a 4 percent rise in real income.

According to the ECOSTAT prosperity index (the average of small and medium-sized enterprises, TOP-100, and populace confidence indexes) the participants in the economy did not anticipate a significant rise in the last quarter of 2001, the third quarter's expectation index (49.0 %) fell still further by the last quarter (47.3%). The property barometer reflecting changes in the property market (polling real estate dealers and developers, enterprises, the population and local governments) had continually risen in the previous year, some correction was made in the last quarter of the year indicating the slight slowing down in the dynamic expansion of the property market.