ECOSTAT NEWSLETTER
- March 2002 -
 

Half a year after the September 11^th terror attacks, economic researchers in the United States cannot agree on whether or not there has been a recession in the American economy at all. This is justified by the continually improving macro-economic data and expectation indexes, which indicate that the period of slowing down was not sufficiently long to be labelled a 'recession'. In his regular reports the president of the Federal Bank also depicts an increasingly optimistic picture and remains committed to maintaining interest rates at their current level. This demonstrates confidence in the economy's recovery, and some analysts are even talking about an anticipated 5-6 percent growth in the gross domestic product (GDP) for the first half of the year.

An economic upturn has been anticipated within the European Union from as early as the first half of the year. The economy in the EU has not slowed down to the extent that it has overseas because home consumption was able to compensate for foreign economic effects. Characteristically, while the foreign trade balance of the Euro-Zone has shown a surplus of 50 billion Euro, a figure that also include its trade with the other three EU countries, the 15 countries of the EU have accumulated the same level of deficit. This indicates that the significance of domestic trade is far from being negligible in the context of a world economic recession. At the same time, the European central banks are also considering raising their interest rates. All in all, greater growth can be expected in this region than there was in the preceding year, but still not matching the scale of that in the United States.

Preliminary data indicates that Hungarian economic output in 2001 expanded at a rate of 3.8 percent, which is 1.4 percent slower than in the preceding year. Home demand partly compensated for the sluggishness of international demand and consequently the slowdown was more limited than in the developed countries. In 2002, the anticipated rate of expansion is similar, around 3.6-3.8 percent, and increasing dynamism will be characteristic within the year. This is partly due to an increase in exports, as well as to a parallel increase in investment. The attitude of corporations towards stockpiling indicates an anticipatable growth in demand that can be traced back across the ECOSTAT Prosperity Indexes. Furthermore, this expected tendency is also underpinned by the increases in imports shown in the data for the first month's income balance. An increase of imports intended for investment will also presumably follow from the second half of the year. Thus, we expect an increase of about 5 percent in investment, 8 percent in exports and 8.5 percent in imports.

The decline in industrial production began in the past year and will also continue in early 2002. Meanwhile, expansion can be anticipated parallel to the forecasted upturn in exports in the second half of the year. Consequently, a total production increase of 3.2 percent - below last year's 4.1 percent - can be expected.

In the previous year, the external balance was favourable, although the deficit of 3.6 billion Euro in the figures for the trade of goods can still be considered high. The current income balance has turned out well despite corrections. This year, as a consequence of the above mentioned increase in imports intended for investment, the balance can be expected to worsen. We predict a foreign trade balance deficit of 3.4 billion Euro and for a current income deficit of 1.8 billion.

Disinflation has been tangible over the past year. The transformation of monetary policy - and within that the broadening of the scale - as well as the favourable changes in the prices of raw materials in the world markets have played significant roles in that. In the year ahead of us, it can be presumed that these factors will not support a slowing down of price increases to such a decisive extent. The price of oil per barrel has reached 25 US$, which means that it has already risen by nearly 20 percent since the beginning of the year. Furthermore, the rise in the forint's value can be viewed as an isolated incident that could have an effect through a dampening of expectations in the long term. In all, we predict that the annual average in price increases will be 5.8 percent for the year.

In the past year the level of employment has improved, despite a slower rise in the GDP. The unemployment rate has dropped to 5.7 percent. We do not anticipate any significant change in the level of employment in 2002.

The ECOSTAT prosperity indexes depict a different picture for the end of the first quarter year from that of the half a year that will follow. Compared against the previous months, while the expectations of small and middle-sized enterprises still fail to demonstrate any confidence in growth, the largest companies in the Hungarian economy (the TOP 100) are a little less certain when making their predictions concerning the Hungarian economy. Presumably, the rise in oil prices and the further slowing down in industrial output at the beginning of the year are a part of the background to that. The Property Barometer, which reflects expectations on the property market, shows further positive expectations from the players in the field. Something that is also underpinned by the outstanding dynamic in the construction industry sector in the first month.