[ad_1]
However, the situation in the media market is constantly changing: if you want to support quality business journalism and want to be part of the Portfolio community, subscribe to Portfolio Signature articles. Know more
According to raw data, the Hungarian economy fell 13.6% in the second quarter of this year, and there was no example of such a contraction even during the global economic crisis. According to balanced and seasonally adjusted data, the performance of the economy fell by 13.5% year-on-year and by 14.5% quarter-on-quarter. Hungary’s performance is not unique: we see unprecedented setbacks in most European countries, as the period of severe closures to combat the coronavirus crisis and curb the epidemic was concentrated in the first half of the year. However, in regional comparison, the national economy performed particularly weakly during the period.
However, we also had a minimal advantage over the eurozone this quarter, which means that the countries of the monetary union also fell more than ours:
The significant decline is due to the fact that almost all segments of the economy have been affected by the coronavirus crisis. From the production side viewed:
- the performance of the industry contracted by 20.1%, of which the manufacturing industry contracted by 21.7% compared to the same period of the previous year. Among the manufacturing sectors, the growth of pharmaceutical production moderated the fall, with the production of road vehicles the one that contributed the most to the fall in the value added of the industry.
- The gross added value of services decreased by 12.2%. The biggest drops were in the arts, entertainment and other services (27.1%) and transportation and storage (24.6%). This is not surprising, as cinemas and theaters were closed during the restricted period, seriously affecting the industry.
- The added value of commercial, accommodation and catering activities and professional, scientific, technical and administrative activities decreased by 12.6 and 14.1%, respectively. The behavior of financial and insurance activities increased by 3.4%. The combined value added of public administration, education and healthcare decreased by 13%.
- The added value of construction decreased 13.2%.
- The performance of agriculture decreased by 2.1% compared to the same period of the previous year.
The CSO notes that the epidemic caused by the new coronavirus has an impact on the collection and quality of the data used to calculate GDP and therefore on the compilation of GDP. “In the second quarter, the impact spread to most branches of the national economy. In agricultural, financial and insurance activities, the impact of the economic situation due to the epidemic could not be detected,” they write.
As the following table shows, on a quarterly basis, we can see a particularly deep drop in almost all sectors:
If we look at which sector has pushed GDP back by how much, we can see that the contraction in industry and the service sector was the most unfavorable factor. Although the construction industry suffered a sharp decline, this sector has little weight in the economy, so it has not slowed down economic performance much.
From the application side A similar image emerges in front of us:
- Real household consumption decreased 8.6% compared to the same period last year. Among the components of real consumption, the consumption expenditure of the households with the highest participation decreased by 8.4%.
- The volume of social benefits in kind received from the government decreased by 11.1%, while the consumption of community consumption increased by 5.8%.
- Gross fixed capital formation decreased 13.5% compared to the same period last year. Both investment in construction and investment in machinery and equipment decreased significantly.
- Due to consumption and accumulation processes, domestic consumption decreased by 6.1%.
- Liabilities amounting to HUF 53 billion were generated in foreign trade (at current prices). (The last time the foreign trade balance was negative was in the fourth quarter of 2008). The volume of exports decreased by 24% and that of imports by 15.8%.
On the consumption side, changes in inventories and community consumption also contributed positively to changes in GDP, with the significant budget deficit accumulated by the government in the first half of this year to mitigate the negative economic effects of the epidemic. of coronavirus. However, it can be seen that most branches of the national economy also fell on the consumption side, with a significant contraction in household consumption, a fall in investment and a deep flight in exports.
The behavior of the Hungarian economy in the first half of the year was 6.1% lower than last year, so it is certain that this year it will end with a significant decline. Looking at the outlook, the Hungarian economy may have gained strength in the third quarter, as production at temporarily closed factories may have recovered and the service sector may have also gained strength. As a result, the third quarter may already be about recovery, but there is still a lot of uncertainty about the future. The second wave of the coronavirus epidemic may again cause difficulties and uncertainties in the next period, not only in Hungary but throughout the world, and the economic problems of the European economy will seriously affect the Hungarian economy through exports. And if new austerity measures are to be implemented to keep the epidemic under control, we must be prepared for weaker agricultural performance. The historic recession in the second quarter certainly won’t happen again, as governments don’t want to fend off the virus with a complete shutdown, but selective austerity won’t leave the economy intact either. Not to mention that prudential considerations (due to an uncertain future) can be strong on the part of businesses and households, potentially holding back growth in both consumption and investment. The most likely scenario now is that the Hungarian economy will suffer a 5-7% recession this year, depending on how prepared we are for the second wave of the epidemic and how successfully we can control the virus with specific and less restrictive measures than before.
Cover image: Getty Images
[ad_2]
