Bloomberg News

Hungarian Industry Returns to Growth as Government Sees Recovery

June 07, 2013

Hungary’s industrial output expanded in April for the first time this year, exceeding economist forecasts and underscoring the government’s prediction of an economic turnaround. The forint and stocks gained.

Industrial production rose a workday-adjusted 2.9 percent in April, the biggest gain since December 2011, the statistics office in Budapest said today based on preliminary data. The median estimate of 11 economists in a Bloomberg survey was 1.4 percent. Output rose 1.2 percent from March. The country posted a 700.5 million-euro ($927 million) trade surplus in April, compared with a 523 million-euro estimate in a separate poll.

“There is an underlying turnaround in the Hungarian economy,” Zoltan Torok, an analyst at Raiffeisen Bank International AG (RBI) in Budapest, said in an e-mail today. “We have expected such a turnaround to kick in during the course of 2013 anyway, alas only for the second half, however, the statistics suggest that it has come earlier than we have estimated.”

Prime Minister Viktor Orban, who faces elections in 2014, has sounded an optimistic tone about the outlook for the economy, saying May 30 that it’s “one of the most promising in Europe.” Gross domestic product may grow 1 percent this year, according to the premier, whose forecast exceeds the government’s 0.7 percent projection and the European Union’s 0.2 percent estimate.

Forint Gains

Hungary’s currency gained 0.4 percent against the euro to 296.80 per euro as of 11 a.m. in Budapest, advancing for a second day. The forint, the best performer among more than 20 emerging-market currencies with a 0.6 percent gain in the past three months, dropped to a four-week low on June 5 amid investor concern that the Federal Reserve may reduce stimulus as the U.S. economy improves.

The yield on the government’s dollar bonds maturing in 2023 rose six basis points to 5.70 percent. The benchmark BUX stock index advanced 1.1 percent to 19,420.68, gaining for a fourth day. OTP Bank Nyrt., the nation’s largest lender, jumped 1.7 percent to 4,929 forint.

Hungary’s recovery from a recession has been hampered by plunging investment and shrinking industrial output in the first quarter. GDP rose 0.7 percent from the previous three months in the first quarter, expanding for the first time since 2011. Economic output declined 0.9 percent from the first three months of 2012.

Agriculture Expands

First-quarter growth was driven by agriculture expanding 12.3 percent from a year earlier and construction growing 4.2 percent, benefiting from a low base. Still, fixed capital formation, an indicator of investment, declined 5.6 percent, industry contracted 3.2 percent and household consumption fell 1.2 percent, the statistics office said yesterday.

A “significant rise” in car exports and a low base last year contributed to the industrial output boost in April, statistician Miklos Schindele told reporters today.

April retail sales rising 3.4 from a year earlier, the most since September 2006, point to “upside risks” to JPMorgan Chase & Co. (JPM:US)’s estimate of 1 percent seasonally adjusted annual economic growth in the second quarter, Nora Szentivanyi, an economist at JPMorgan Chase & Co. in London, said in an e-mail.

“With only April data at hand and mixed messages from the May surveys we feel it is too early for us to revise our second-quarter forecast,” she wrote “The markedly stronger retail sales figure and today’s industrial production print both suggest that the slowdown in sequential growth might not be as sharp as we are forecasting.”

Growth Forecast

Hungary’s economy may grow 0.5 percent this year, Raiffeisen said today, upgrading its forecast from stagnation. The bank forecasts 1.5 percent growth in 2014, Torok said. MKB Bank, the local unit of Bayerische Landesbank, also raised its 2013 GDP forecast today to 0.5 percent, from 0.2 percent, economist Zsolt Kondrat said in an e-mail.

Orban sacrificed growth in his first two years in office to bring the budget deficit within the European Union limit of 3 percent of GDP and remove the threat of cuts in funding from the 27-member bloc. Measures included Europe’s highest bank tax and extraordinary corporate levies on industries such as energy, damaging lending and investment.

The European Commission last month recommended allowing Hungary to exit budget monitoring for fiscal offenders for the first time since it joined the bloc in 2004, a move Orban said was a validation of his economic policies.

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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