Hungary Economic-Growth Rate Rises to 4-Year High on Exports
Hungary’s economy grew at the fastest annual pace in four years in the first quarter as rising exports to Germany fuel a recovery from the worst recession in 18 years.
Gross domestic product expanded 2.4 percent in the January- March period from a year earlier, the most since the same period of 2007, according to a preliminary estimate published today by the Budapest-based statistics office. That matched the median estimate of 10 economists in a Bloomberg survey. Growth was 0.7 percent on the quarter.
Germany’s economy, Europe’s largest, surged 5.2 percent in the first quarter, the biggest increase recorded since that country’s reunification two decades ago. Hungary is looking to the euro region, which buys 60 percent of products made or assembled in the country, including Audi AG cars and Nokia Oyj (NOK1V) mobile phones, to power its resurgence after the global financial crisis.
“Industrial exports are pulling the economy along while domestic demand is still weak,” Zoltan Arokszallasi, a Budapest-based economist at Erste Bank AG, said by phone today. He estimates growth of 2.7 percent this year and 3.1 percent in 2012.
The forint weakened 0.1 percent to 266.76 at 9:32 a.m. in Budapest. The benchmark BUX stock index rose 0.5 percent to 23,481.32, led by OTP Bank Nyrt., the nation’s largest lender, and Mol Nyrt., Hungary’s biggest refiner.
Hungarian industrial production rose 9.2 percent in March from a year ago, matching a preliminary estimate, the statistics office said in a separate release today.
Tax Cuts
The government introduced a flat 16 percent personal income tax this year, cutting taxes for those earning more than the average salary, and reduced the corporate tax rate to 10 percent for small and medium-size companies to spur growth.
Prime Minister Viktor Orban wants to boost economic growth to 3.2 percent this year and as much as 5.2 percent by 2014. GDP expanded 1.2 percent in 2010 after five consecutive quarters of contraction that started in 2008. Achieving Orban’s goals may help Hungary in its bid to reduce its public-debt level, the highest among the eastern members of the European Union.
‘Undoubtedly the Engine’
“Exports and industrial production were undoubtedly the engine of growth,” government statistician Peter Szabo said. “Household consumption continued to stagnate while the construction industry continued its slump and the financial industry shrank.”
The International Monetary Fund estimates Hungary’s economy will grow 2.8 percent this year and next, according to a regional economic outlook released on May 11.
It will be “very difficult” for Hungary to achieve its growth targets because of its shrinking population and the second-lowest employment rate in the EU, according to Anthony Thomas, a risk analyst at Moody’s Investors Service.
“If you look at the labor market, it’s a shrinking population, the participation rate is low," Thomas said May 4 in Prague. "So in terms of generating strong growth it’s just very difficult to see where that’s going to come from,”
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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