Country Report Hungary July 2009

Summary

The Economist Intelligence Unit expects the Hungarian Socialist Party (MSZP) to remain in office as a minority government until the parliamentary election in 2010, with support from the SZDSZ-Hungarian Liberal Party (SZDSZ).
The new prime minister, Gordon Bajnai, has promised to make further deep cuts in fiscal spending and to implement structural reform.
The new cabinet will aim to keep the public finances in check so as to guarantee a steady flow of funding from the multilateral agencies and to ensure that investors do not lose confidence.
Real GDP is forecast to contract sharply in 2009, as further austerity measures hit domestic demand and recession in the euro area curbs exports. The economy is expected to remain in recession in 2010.
Annual average inflation is forecast to fall to 4.3% in 2009 and to 3.7% in 2010, as international commodity prices fall and domestic demand falters.
The current-account deficit is set to average around 3.1% of GDP in the forecast period, as depressed domestic demand curbs imports and as income debits fall.

The main opposition party, Fidesz-Hungarian Civic Union (Fidesz), emerged as the clear winner in the elections to the European Parliament held on June? 7th. The MSZP received just 17.4% of the vote.
A worrying development has been the population's growing affiliation with radical ideas and political groups. This is evident in the strong support for Jobbik, a far-right party, at the European elections.
A pessimistic outlook for the economy has been outlined in the Inflation Report of the National Bank of Hungary (NBH, the central bank).
Hungary has reached an agreement with the EU to draw on the third, ???1.5bn (US$2bn) tranche of the credit facility that it secured in October 2008.
Investment was 7.7% lower in the first quarter of 2009 than in January-March 2008, with recession-related cutbacks occurring in most segments.
As firms continue to downsize or close in response to the recession, Hungary's unemployment rate has edged upwards, to 9.9% in February-April, from 9.7% in the preceding three month period.
Consumer price inflation rose to 3.8% in May, following a rise to 3.4% in April that broke a trend of deceleration that began in the middle of 2008.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60
NAICS Code: 52