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Quote of the week:

"But it was worth it! We did it! The economy is solid, the crisis is over!"

Minister of Economy György Matolcsy at a meeting with AmCham Hungary representatives

 

Képes:

MPs of liberal LMP threw thousands of blue tickets on the heads of Fidesz MPs on October 29, as the two-thirds majority have greenlit an amendment to the Hungarian Constitution that ties the right to participate in the general elections to a pre-registration process. LMP representatives demonstrated against the decision referring to the 1947 "blue ticket" elections, where the communist party (MKP) swept the board by manipulating the lists of registered voters and other fraudulent tactics. The 1947 elections were among the last strategic steps towards the dictatorship of the communist party that ended in 1989.

Economics

 

Central bank cuts rates further to 6.25%

The National Bank of Hungary's Monetary Council decided on Tuesday to cut the central bank's key base rate by 25bp to 6.25%, effective October 31. The rate reduction was the third 25bp cut in a row. Before the cuts, the base rate was unchanged at 7.00% between December 2011 and August 2012. The move came as little surprise to analysts who thought it likely the Council's external members would again outvote the MNB governor and his deputies. The four external members voted for cutting the base rate at the previous two rate-setting meeting while MNB governor András Simor and his two deputies voted to keep the rate on hold. Speaking at a press conference after the meeting, Simor said the council voted on two options: one to keep the rate on hold and the other to cut it by 25bp. After a debate, the latter proposal was supported by a "narrow majority", he said.

GKI lowers growth forecast for 2013

Economic research company GKI expects the Hungarian economy to stagnate in 2013 after a 1.5% decline this year, lowering its GDP growth forecast from 0.8% due to recently announced austerity measures. GKI said the government's latest fiscal adjustment package, which includes tax hikes, and particularly the postponement of the scheduled halving of the special bank levy, greatly deteriorates the business climate. The adverse effects of the adjustments on lending and demand more than offset the positive impact of a recent job protection action plan that will make employment of specified employee groups cheaper, the researchers said. According to GKI, inflation is expected to accelerate to 5.5% as an annual average, slightly down from 5.9% this year. Real wages could fall 1.5% and consumption is expected to decline 1%. GKI expects investments to decline further, at a pace of 2%. Employment is also expected to shrink further in the business sector.

Hungary to take over credit from debt-laden municipalities

Hungary’s central government will take over HUF 612 billion of local council debt to ease the burden on municipalities and avoid a breakdown in their operations, Bloomberg reported. The government will consolidate the entire debt load of the 1,700 municipalities that have 5,000 inhabitants or less, amounting to HUF 97.3 billion. The central budget will also take over some debt from larger local councils totaling HUF 515 billion. Hungary’s 3,200 local councils are struggling to repay their debt, much of which is denominated in Swiss francs, after the forint weakened and a grace period on bond principal repayments ran out in 2011. Municipalities have increasingly borrowed in foreign currencies since 2007 after the government reduced funding to cut the budget deficit, which in 2006 was the widest in the European Union at 9.3% of economic output.

No new date for IMF talks with Hungary, Budapest rep says

The International Monetary Fund has no date for its next round of talks with Hungary on a financing backstop, its representative in Hungary told Reuters. According to Iryna Ivaschenko, "There are no dates yet for the negotiation mission to return to Budapest." She added that latest round of fiscal adjustments announced by the government went against the IMF's earlier recommendations. "As we stated before, we believe that the focus of fiscal adjustment should be on achieving a more balanced consolidation, shifting away from ad hoc tax measures," she said. "This will help reduce the budget deficit in a sustainable manner and, when combined with structural reforms, generate higher and more inclusive growth. Several of the measures announced last week are not aligned with these objectives," she added. Anonymous sources note that IMF officials found it insulting that the government has launched an anti-IMF campaign in Hungarian media exactly when the government’s head of IMF negotiations, Mihály Varga, was to continue talks with the organization in Tokyo.

Hungary slips to 54th place in Doing Business ranking

Hungary has slipped to 54th place on the World Bank's latest Doing Business ranking from 51st a year earlier. The ranking gauges regulations that enhance or constrain business. The World Bank said that Hungary made starting a business more complex by increasing the registration fees for limited liability companies and introducing a new tax registration scheme. On the other hand it improved access to credit information by passing its first credit bureau law, mandating the creation of a database with positive credit information on individuals. In the area of taxation, Hungary made paying taxes easier for companies by abolishing the community tax, the World Bank said. At the same time, Hungary increased health insurance contributions paid by the employer, it added. Hungary reduced the time to export and import by allowing electronic submission of customs declarations and other documents, the bank said.

Gov't deficit target remains at 2.7% despite additional fiscal measures

Despite the additional budget correction measures announced in mid-October, the target for the 2013 general government deficit has remained unchanged at 2.7% of GDP, the National Economy Ministry said in a statement. The government upped next year's deficit goal from 2.2% of GDP when announcing a HUF 397 billion fiscal adjustment package as part of Hungary's Excessive Deficit Procedure in early October. Citing unfavorable European Commission response as to the effect of the first package, it announced additional budget correction measures worth HUF 367 billion a week later. The two packages do not overlap and thus amount to a combined budget improvement of HUF 764 billion, the ministry said.

EC turns to court over Hungary telco tax

The European Commission (EC) has turned to the European Court of Justice regarding Hungary's extraordinary telecommunications sector tax. The Commission sent a letter of formal notice to Hungary in June concerning the "crisis tax" that has been levied on telecommunications companies since 2010. The letter was sent after a careful review of complaints by foreign companies from other European Union member states that the taxes were discriminatory, an EC spokesperson said at the time. Hungary had two months to provide further information on the tax. The Commission earlier expressed concern that the telco tax was levied to cover costs other than administrative and regulatory costs related to the telecommunications sector and was therefore incompatible with EU telecom rules. The National Economy Ministry said after the court's announcement that Hungary could well defend its stand on the matter as the dispute is about a tax, not a charge. If the Commission takes an unfavourable decision on the matter, Hungary would have to refund about HUF 160 billion in tax, but the amount would not show up in this year's budget, the ministry said.

Liquidity situation is critical for Hungarian businesses

About 27% of Hungarian companies now say their liquidity situation is "critical" or "very critical", up from 18% a year ago, a survey by consultancy Roland Berger shows. The percentage of companies that gave the same assessment to their liquidity situation across Central and Eastern Europe rose to 19% from 14% during the period, according to the survey.

 

Business

Telenor Magyarország earnings drop on telephone tax

Telenor Magyarország's third-quarter EBITDA fell 20% to HUF 12.2 billion from the same period a year earlier because of a recently introduced tax on telephone calls and text messages, the mobile telecommunications company said. Telenor Magyarország said it paid HUF 2.5 billion on the telephone tax – introduced in July – and an additional HUF 2.4 billion on the telecommunications sector "crisis tax" in Q3. The combined amount was equivalent to 12% of revenue during the period, it added. Revenue edged down 3% to HUF 40.5 billion because of a reduction in call termination fees from January. The company had 3,458,000 subscribers at the end of September, 13,000 more than three months earlier. Based on SIM cards in use, the company's market share edged up to 31.47% from 31.38%. Its share of the mobile internet market reached 28.89%. CAPEX rose by HUF 800 million to HUF 3 billion in Q3 from the same period a year earlier.

Pannon Pulyka and Sága Foods to lay off 400 workers

Poultry meat companies Pannon Pulyka and Sága Foods will lay off 400 workers in Hungary because owner Bernard Matthews Holdings' is reorganizing its companies in the country, Saga Foods said in a statement. Bernard Matthews Holdings plans to further develop its profitable processing activities, while eliminating its loss-making animal husbandry operations, Sága Foods said.

Ten new venture capital funds to start operating before year-end

Ten new venture capital funds can start operating before the end of this year, supporting innovative micro-, small and medium-sized businesses with funds of HUF 41 billion, the National Development Agency (NFÜ) told MTI, announcing the results of tenders called as part of the New Széchenyi Venture Capital Programs. The programs are co-funded by the European Regional Development Fund. NFÜ received 33 applications from 21 businesses to the two tenders called in the summer with a limit of HUF 28.5 billion. According to the tender invitation, the fund management companies must draw in a minimum of 30% in private funding. These funds will add up to the HUF 41 billion limit, the statement said.

GE to start LED production in Hungary by year-end

GE Lighting will start production of LED lights at its plant in Nagykanizsa this quarter, GE regional chairman-CEO Phil Marshall said on Friday. Parts for the LED lights will come from GE's plant in nearby Zalaegerszeg, Marshall said. Three years earlier, GE announced mass layoffs at its lighting business in Hungary because of a European Union directive phasing out conventional, low efficiency lighting by 2013.

Wizz Air wins Malév slots to Istanbul, Antalya, Moscow

Hungary’s no-frills airline Wizz Air announced that the Civil Aviation Authority granted the carrier the right to fly from Budapest to Antalya, Istanbul and Moscow. The approval becomes final once the diplomatic procedures are concluded and the relevant Turkish and Russian authorities greenlight the decision. As soon as the approvals from Turkey and Russia are received Wizz Air will start selling tickets to the above destinations at once, the airline said in a statement.

Metro rebrands Saturn stores in Hungary

Germany's Metro group is rebranding its Saturn electronics stores in Hungary, turning them into Media Markt units from November 1, Media Markt Saturn Holding Magyarország told Penzcentrum.hu. The move is part of a rationalization strategy, Media Markt managing director Csongor Németh told the business news portal. There were 16 Media Markt stores and five Saturn stores in Hungary at the beginning of this year.

Financial market watchdog fines ING fund manager for illegal charges

Financial market regulator PSzÁF has fined ING's fund manager HUF 200 million for illegally charging members of its voluntary and private pension funds several billion forints. PSzÁF instructed ING to comply with regulations on fund management. The fund members were refunded the charges by the end of September under an earlier court order.

Home prices could stop falling this year

About 70,000 residential properties changed hands in January-September 2012, almost 10% more than in the same period last year, according to market-leading real estate broker Otthon Centrum (OC). For the entire year 2012, OC however projects a total of 90,000 transactions only, similar to last year's number, predicting that the decline in home prices will come to a halt this year. The number of home sales transactions was 40% up in the first quarter of 2012 in Hungary from a year earlier due to early forex mortgage repayments, OC said in a statement. Later in the year the number of home sales fell steadily. In January-September 2012, prices were still down from a year earlier, however, looking at the quarter-on-quarter changes this year, the decline is far smaller. Prices of existing non-prefabricated homes fell minimally in Budapest, while rising slightly in the countryside between the past two quarters, and prices of prefabs remained stable.

Fiat Group to merge regional units in Budapest

The Fiat Group will merge its Hungarian, Czech and Slovak brand offices into a new Budapest-based company in January 2013, the company told national news agency MTI. The new regional center will represent all Fiat brands in the region under the name Fiat Group Automobiles Central and Eastern Europe.

Orangeways-City underbids Veszprém bus service provider

Hungarian-owned bus company Orangeways-City stands to win a tender to provide services for the city of Veszprém (NW Hungary) after underbidding the current service provider, business daily Napi Gazdaság reported. Orangeways-City's bid was lower than that of the Balaton Volán, which currently provides the city's bus services, the paper learnt. Orangeways-City said it would use 45 new compressed natural gas-fueled buses for the 2.2 million kilometer a year contract, the paper added.

BSE fines Kreditjog and HUN Mining for failing to publish reports

The Budapest Stock Exchange (BSE) has fined property development and operation company Kreditjog HUF 1.5 million and asset-management company Hun MINING HUF 1 million for failing to publish their required financial reports, BSE CEO Zsolt Katona announced on the exchange's website on Wednesday. Katona called upon Kreditjog and Hun MINING to publish their 2012 first-half financial reports and for the latter company to publish its H1 interim report or corresponding quarterly report as well pursuant to BSE regulations. Both Kreditjog and Hun MINING are category B issuers at the BSE.

Domestic

Budapest Transport Company to raise public transport fees 5-8% next year

The Budapest Transport Company (BKV) plans to raise public transport fees 5-8% in 2013, according to daily Magyar Nemzet. The newspaper said that the Budapest Public Transport Center (BKK) would submit various proposals regarding a hike in public-transport fares to the Budapest Council on Wednesday. Magyar Nemzet noted that Budapest mayor István Tarlós and Budapest Transport Company CEO Dávid Vitézy have both cited the need to raise public transport fees in 2013, the first such increase in three years, to compensate for their 15% real-term price decline over that time.

One dead in car crash with Hungary PM aide

One woman was killed in a car crash involving a senior aide to Hungarian Prime Minister Viktor Orbán on a motorway south of Budapest. Police spokesman Tamás Nyikos told private broadcaster InfoRádió that the driver of the other car involved in the accident on motorway M5, 109 kilometers southeast of the capital, died at the scene. "A young woman driving the car was injured so severely that ambulance services could not help her, she died on the spot," Nyikos said. He said police were unaware of any further serious injuries in the crash near the town of Kecskemét. The government spokesman's office confirmed that head of Orbán's office, János Lázár was involved in the crash, giving no further details.

Hungarians watch more than four hours of TV a day

Hungarians watched on average four hours and 21 minutes of television a day in the third quarter, data compiled by market research company Nielsen show. Nielsen's gauge of viewing habits showed the share of viewership enjoyed by public broadcasters rose three percentage points to 15.4%. The share of the two biggest commercial broadcasters fell more than five percentage points to 31%.

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