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5th February, 2019

Raiffeisen says growth has peaked

Economic growth will drop to 3.4% this year and will slow further in the following years, according to the latest quarterly forecast from Raiffeisen Bank.

Hungary reached the peak of the current economic cycle in 2018 and growth will gradually slow in the coming quarters, said chief analyst Zoltan Torok.

The external environment will become less supportive of growth and economic policy will be less able to support growth than before, according to the study.

Raiffeisen forecasts GDP growth of 2-3% in both 2020 and 2021.

On the labour market, a reversal of the current trend is expected in 2020 when unemployment could rise and the pace of wage growth could slow.

Analyst Gergely Palffy took note of the worse-than-expected activity in the euro area, saying this could force the European Central Bank to delay the start of interest rate hikes from the third quarter to the fourth.

Raiffeisen expects core inflation to exceed 3% in the first quarter and to reach 3.3% on average for 2019, while headline inflation will be lower at around 2.5% (napi.hu)
5th February, 2019

Matolcsy sees euro adoption in decades

Hungary will adopt the euro “in the coming decades,” MNB governor Gyorgy Matolcsy said at the sixth annual Sandor Lamfalussy conference on Monday.

His comment signals that there is no change in the government’s position on the euro, Portfolio notes, adding that in joining the EU, Hungary and other Eastern European members agreed in principle to adopt the euro but that seems far away.

A fully mature euro is needed if the common currency is to withstand future crises, Matolcsy said, adding that when the euro was introduced, Europe was enjoying prosperous times and there was no thought of another economic crisis.

However, Matolcsy argued, the eurozone was not properly established and the EU did not manage the 2008 financial crisis well. The primary mistake came when Europe responded to the crisis with austerity, he added.

In contrast, Matolcsy praised the rapid reaction of US policymakers, saying that is why the economic crisis was essentially over in the US by 2009.

The main lessons from the 2008 economic crisis are the need to act quickly, and that central banks and governments must act in a close, strategic alliance, he said. (portfolio.hu; profitline.hu; napi.hu; 24.hu; profitline.hu)
5th February, 2019

Audi’s investments propel Gyor to richest county in Hungary

Of Hungary’s 19 counties, Gyor-Moson-Sopron’s development was by the far the strongest from 2007 to 2016, according to an analysis by Portfolio in the aftermath of the week-long strike at Audi.

Per capita GDP in Gyor-Moson-Sopron county was only 68% of the EU average in 2007, but grew to 92% by 2016.

Besides the positive impact of EU development money, the main driver of growth was the ramped-up production at Audi’s plant in Gyor.

The value added by large vehicle makers such as Mercedes in Bacs-Kiskun county and Suzuki in Komarom county was also noticeable after they opened factories in those areas.

Audi produces two million engines and 100,000 cars annually at the Gyor plant, making the company a significant economic force in the region.

In the convergence race, Vas and Fejer counties were the runner ups, where the gap to the EU average was closed by 13 percentage points.

Bacs-Kiskun country’s per capita GDP compared to the EU average was slightly above 50%, an increase of 12 percentage points in a decade.

In the eastern part of the country, Csongrad and Borsod-Abauj-Zemplen counties moved seven and eight percentage points closer to the EU average.

Budapest’s per capita GDP was 136% of the EU average in 2016, up from 131% in 2006, but down from 144% in 2013.

Due to the high development of the Central Hungarian region, Budapest and Pest country were not eligible for as much EU funding as in the 2007-13 period.

For this reason, Pest county was detached from the capital as a separate region to allow greater inflow of EU funds.

Per capita GDP in the county was 54% of the EU average at the end of 2016. (portfolio.hu; profitline.hu; hvg.hu)
5th February, 2019

New car sales up 9% last month

New passenger car registrations in Hungary reached 9,714 in January, a 9% rise, year-on-year, according to figures from DataHouse.

The vehicle importers association MGE expects new car sales to reach 160,000 this year, after 136,601 cars were put into circulation last year.

Sales of light commercial vehicles could jump from 22,725 to around 30,000 this year.

The MGE expects flat sales in the heavy vehicle segment for 2019. Sales in this category could decline in the first six months then bounce back in the second half of the year, with the resumption of the MNB’s growth credit programme.

Commenting on the data, the MGE advocated stricter regulations in the import of second-hand cars and the replacement of the ageing bus fleet. (vg.hu; autoszektor.hu; napi.hu)

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