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Country Report Hungary

Publication Date June 2008
Publisher EIU
Product Type Report
Pages 23
ISBN Number not applicable
Product Code EIU00008
Price

£145.00
approximately: $271 | €184

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Summary

Outlook for 2008-09

  • The governing coalition of the Hungarian Socialist Party (MSZP) and the SZDSZ-Hungarian Liberal Party (SZDSZ) broke up in April 2008, with the SZDSZ leaving in the wake of an overwhelming referendum defeat.
  • We expect the MSZP to remain in office as a minority government throughout the forecast period, with external support from the SZDSZ.
  • The MSZP prime minister, Ferenc Gyurcsany, could face an internal leadership challenge within the next couple of years.
  • We expect the budget deficit to meet the targeted 4% of GDP in 2008, but to be above target in 2009. Structural expenditure reforms will be limited, owing to broad public and political resistance to any such measures.
  • Real GDP growth will be a sluggish 2% in 2008 but recover more strongly in 2009, as the effects of austerity measures wane.
  • Average annual inflation will decline to 6.3% in 2008 and to 4.3% in 2009, as changes in regulated prices and subsidies fall out of the year-on-year calculations.
  • The current-account deficit is forecast to increase steadily as a percentage of GDP in 2008-09, reflecting a gradual recovery in domestic demand.

Monthly review

  • The government is fragile, but with parliament going into recess on June 15th, there are no immediate threats to the MSZP's position.
  • The government has gained parliamentary approval for legislation that revokes Hungary's controversial healthcare bill.
  • The popularity of Fidesz, the main opposition party, may be hit by a leaked speech in May by the party president, Viktor Orban, in which he allegedly raised the possibility of freezing pensions and halting major state investments.
  • The National Bank of Hungary (NBH, the central bank) raised its base rate in May by 25 basis points, to 8.5%, in response to concerns about persistently high inflation.
  • In its latest inflation report the NBH has raised its inflation forecasts for both 2008 and 2009, to 6.3% and 4.2%, respectively.
  • Real GDP growth was 1.6% in January-March 2008, held up by exports. All components of domestic demand contracted, which raises questions about the economy's ability to recover from internal and external shocks.
  • Consumer price inflation rose by 0.3% month on month in April, and by 6.6% year on year.

SOURCE: Country Report

Content

  • Highlights
  • Outlook for 2008-09: Domestic politics
  • Outlook for 2008-09: International relations
  • Outlook for 2008-09: Policy trends
  • Outlook for 2008-09: Fiscal policy
  • Outlook for 2008-09: Monetary policy
  • Outlook for 2008-09: International assumptions
  • Outlook for 2008-09: Economic growth
  • Outlook for 2008-09: Inflation
  • Outlook for 2008-09: Exchange rates
  • Outlook for 2008-09: External sector
  • Outlook for 2008-09: Forecast summary
  • The political scene: The budget will be a major test for government stability
  • The political scene: The government is to rework the healthcare reform bill
  • The political scene: Mr Gyurcsany is likely to face a leadership challenge
  • The political scene: There may be a decline in Fidesz's popularity
  • Economic policy: The interest rate is raised in May
  • Economic policy: The NBH releases a new inflation report
  • Economic performance: Real GDP picks up slightly
  • Economic performance: Investment is declining
  • Economic performance: Performance of industrial sector weakens
  • Economic performance: Consumer price inflation falls slowly
  • Data and charts: Annual data and forecast
  • Data and charts: Quarterly data
  • Data and charts: Monthly data
  • Data and charts: Annual trends charts
  • Data and charts: Monthly trends charts
  • Political structure