Bloomberg News

Hungary Sees 0.5% Economic Growth in Second Half on Germany

June 13, 2012

Hungary’s government forecasts that the economy, which contracted in the first quarter, may grow in the second half as the German economy’s resilience may boosts exports.

Gross domestic product may “possibly” expand 0.5 percent in the second half and about 1 percent in 2013, the press office of Mihaly Varga, the minister in charge of obtaining international aid, said in an e-mail today. The Cabinet’s 0.1 percent growth forecast for 2012 is unchanged, Varga said, correcting an earlier statement on TV2 today when he said the economy may grow “at least” 0.5 percent.

“Hungary is quite strongly linked to Germany’s indicators and growth and it seems that Germany is doing better than other European countries at coming out of the crisis,” Varga told TV2. “That may provide some momentum to Hungarian exports and lead to a higher economic-growth rate for our economy.”

Hungary’s economy contracted for the first time in more than two years in the first quarter as the European debt crisis sapped demand for Hungarian exports, the engine of the economy. The country is seeking to start bailout-loan negotiations with the International Monetary Fund and the European Union to cut financing costs and bolster investor confidence at a time when commercial banks are curbing lending, raising the risk of a credit crunch.

Aid Talks

Aid talks may begin in July or August, once the government amends a disputed central bank law and after an EU decision later this month on the country’s finances, Varga told TV2. While Hungary requested aid in November, talks haven’t started because lawmakers passed a disputed central bank law in December that was opposed by the IMF and the EU.

The currency of the EU’s most-indebted eastern member has tumbled 3.5 percent versus the euro since the beginning of May on concern over the delays in reaching a bailout accord, the steepest decline among 31 major currencies tracked by Bloomberg behind the Russian ruble and the Polish zloty. It strengthened 0.3 percent to 297.11 per euro at 10:40 a.m. in Budapest.

Hungary’s economy shrank 0.7 percent in the first quarter from a year earlier after a 1.4 percent expansion in the last three months of 2011. GDP contracted 1.2 percent in the first quarter from the previous three months.

Industrial output plunged in April as mobile phone and television production continued to fall, boosting the chances that second-quarter GDP data won’t improve and the economy will enter its second recession in four years.

Output dropped a workday-adjusted 3.1 percent from a year ago after a 0.6 percent increase in March, the Budapest-based statistics office said June 7 based on preliminary data. Production fell 2.4 percent from March.

To contact the reporter on this story: Zoltan Simon in Budapest at zsimon@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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