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Hungarian economy likely past low-point of recession

Hungary's economy is likely past the low-point of the recession, economic think tank GKI said in its latest report, prepared with Erste Bank.

The economy will probably show minimal quarter-on-quarter growth in Q4, GKI said. Growth in a year-on-year comparison is not expected until the second half of 2010.

GKI projects Hungary's economy will contract by 6%-7% in 2009 and stagnate in 2010. The forecast compares to official projections for a 6.7% contraction this year and a 0.9% drop in 2010.

In the industrial sector, only the mining segment and some manufacturing segments have shown growth. Although domestic sales of the drug industry and food exports have increased.

Farm sector output will plunge in 2009 as the cereals crop, excluding maize, dropped about 25% due to unfavorable weather.

Hungary's unemployment rate reached 10.3% in July-September, and could rise further to 11% by the end of the year. The rate is not seen falling until Q2 2010.

GKI projects real wages will fall 4%-5% in 2009 because of the rise in unemployment, a freeze of family subsidies and the elimination of pensioners' annual bonus. Real wages are likely to stay unchanged in 2010.

The researchers expect Hungary to deliver the 3.9%-of-GDP fiscal deficit target this year, and the 3.9% ratio for 2010, noting that a significantly higher deficit would unlikely be tolerated by global markets.

Hungary's next government could consolidate the debt of state-owned companies, as was the practice in earlier election years, GKI said. If the operation of the companies is reformed, global markets could accept the move, it added. (MTI – Econews)