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Hungary’s economy is in recession - analyst

Analysts told MTI on Friday that Central Statistics Office (KSH) industrial output data released on Friday morning suggests that Hungary has slipped into economic recession.

The KSH preliminary data showed that Hungary’s industrial output fell a workday-adjusted and unadjusted 7.2% in October after declining 5.3% in September. October was the fifth consecutive month in which the country’s industrial output decreased.

Analysts said that they expect industrial output figures to continue to be as weak as they were in October for the next six months.

Zoltán Török of Raiffeisen Bank said that the decline in October industrial output was about twice as high as analysts had expected, adding that the numbers clearly indicate that Hungary’s economy is contracting. Török remarked that industrial output data could be even weaker over the coming months. Török remarked that exports were unable to provide Hungary’s industrial output with a boost in October, noting that it became obvious over the past few months that domestic demand is too soft to generate increased industrial output.

Orsolya Nyeste of Erste Bank said that analysts had expected industrial output to decline by 5.8% in October. Ms. Nyeste commented that Hungary’s outlook in terms of industrial output is contingent upon the performance of euro-zone economies, Germany’s in particular. The Erste Bank analyst predicted that industrial output data would continue to be weak throughout the H1 of 2009, and could begin to rebound during the second half of the year. Orsolya Nyeste cautioned, however, that the currently high degree of economic uncertainty makes it difficult to forecast what will happen next year.

With regard to a previous statement from State Audit Office President Árpád Kovács suggesting that Hungary’s GDP could decline by 4% in 2009, Zoltán Török said that a contraction of this magnitude is possible under the most negative scenario. Török added that he expects Hungary’s GDP to decline by 2.5% if the basic economic scenario materializes.

Orsolya Nyeste said that she expects Hungary’s GDP to decline by the central bank’s projected 0.2% to 1.7% in 2009. Ms Nyeste added, however, that the current degree of uncertainty makes it possible that the country’s GDP will decline by an even greater extent next year. (MTI-Eco)