It was one of the strongest armor of Hungary shattered in the coronavirus crisis

In Hungary, not only the export of products, but also the foreign trade of services has strengthened significantly in recent years. We have made great strides in the field of transportation, more and more tourists have chosen our country, while we have also developed in business services. The good news was that not only the export of certain products was increasing in Hungary after the global economic crisis of 2008-2009, but also that of services, because one of the lessons of the crisis was that services are more resistant to shocks. crisis than products (not so much demand for them).

If the slowdown due to the cyclical fluctuation of the economy had occurred, the strong foreign trade in services could have helped the Hungarian economy in difficult times. But there was a crisis that nobody expected: the economy was hit by a supply and demand shock at the same time, during which companies and households became cautious and, on the other hand, severe bans (exit restrictions and bans travel) pushed the economy back. This, in turn, has been accompanied by a huge drop in demand for services around the world and, in some cases, we have seen the indices of purchasing managers of service providers have fallen more than manufacturing industries. .

In Hungary, foreign trade in services already declined in the first quarter of this year, when Hungarian GDP was still growing on an annual basis. This is because the world economy has already slowed down, the coronavirus epidemic has reached many countries earlier, so restrictive measures have started earlier than here. However, the drastic decline affected the second quarter: according to the latest CSO data, services exports (calculated in euros) decreased by 40% and imports by 25% in the second quarter of 2020 compared to the same quarter of the previous year . Product exports did not decline as steeply during the period.

“The economic effects of the epidemic caused by the coronavirus have increased even more in several areas of foreign trade in services compared to the previous quarter,” estimates the CSO. In the first quarter, exports fell “only” 7% and imports 4%.

In the second quarter, the services surplus fell below € 800 million, while between April and June last year it was still at € 2.4 billion, meaning that most of the surplus melted away. As shown in the following figure, the coronavirus crisis broke the surplus of foreign trade in services in dynamic growth:

The significant decrease in the surplus can be explained mainly by the drastic drop of 86% in tourism assets, but the drop in transport services 69 and the drop of 36% in salaried labor services also contributed significantly to the drop. The decline in tourism is mainly due to the fact that significant restrictions have also been lifted in Hungary due to the spread of the virus, which has prevented or in some cases made it impossible for foreigners to travel here. The figure below shows the decline in spring guest traffic, showing that revenue-important foreign guests are lagging behind:

In the next period, foreign trade in services may improve compared to the second quarter due to the economic recovery, but the effects of the coronavirus epidemic will continue to hold back growth. In the summer months, in addition, the permanent restriction on the entry of foreigners darkens the panorama (which is reflected in the weak tourism in Budapest), so it is not possible to be certain that the situation will improve significantly in this zone. Transportation and business services may have been strengthened, but domestic and international demand is weak, restrictive measures (mainly travel) are still in place in some countries, and p. Eg weakening air traffic can put lasting pressure on foreign trade in services.

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