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Hungarian Economic Expansion Halted in Second Quarter, Revised Data Show
Hungary’s economic recovery halted in the second quarter as rising exports failed to compensate for austerity measures, stifling domestic demand.
Gross domestic product was unchanged from the previous quarter after 0.6 percent growth in the first quarter, according to today’s revised data by the Budapest-based statistics office. The revised figure matches the preliminary estimate. Annual growth in the period accelerated to 1 percent from 0.1 percent in January-March.
The first European Union member to get an International Monetary Fund bailout in 2008, Hungary cut spending to meet the terms of its loan, exacerbating the worst recession since 1991. The country is counting on resurgent demand in the euro region, which buys 60 percent of products made or assembled in Hungary such as Audi AG cars and Nokia Oyj phones, to boost growth.
Agricultural production dropped an annual 13.6 percent in the second quarter and construction output fell 14.1 percent. Services dropped 0.2 percent. Industrial output grew 10.4 percent in the period, including 12.2 percent growth in the manufacturing industry.
The central bank, which forecasts growth of 0.9 percent this year, last month lowered its forecast for the next two years. It now sees an economic expansion of 2.8 percent in 2011 and 3.8 percent in 2012. The previous forecasts were 3.2 percent and 3.9 percent respectively. The economy contracted 6.3 percent last year.
Pro-Growth Platform
Prime Minister Viktor Orban, elected on a pro-growth platform in April, has resisted pressure from the IMF and the EU to commit to the previous government’s pledge to reduce the budget deficit below 3 percent of GDP next year. Economy Minister Gyorgy Matolcsy said last week that Hungary won’t use fiscal expansion next year to fuel growth.
The cabinet has wanted to focus on accelerating growth and creating jobs and lobbied for a looser deficit target than the 2.8 percent of GDP pledged for next year. This year’s budget deficit target is 3.8 percent. The EU has said Hungary, the most indebted eastern member of the bloc, needs to continue fiscal consolidation.
The IMF and the EU, which provided the bulk of a 20 billion-euro ($25 billion) bailout in 2008, suspended their review of the government finances in July without endorsing the cabinet’s budget plans. Orban has said Hungary will do without IMF aid once the current bailout expires in October. Talks are scheduled to resume in October.
To contact the reporter on this story: Zoltan Simon in Budapest at zsimon@bloomberg.net
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