The Hungarian economy has applied the handbrake in the second wave of the epidemic: the difficulty is only coming now

After the drastic recession in the first wave of the coronavirus epidemic, the Hungarian economy clearly gained strength in June and July. Production recovered in factories, households bought more than during the curfew and the service sector found itself after the rebound in tourism (mainly domestic) and the opening of restaurants, pubs and discos. However, mixed macroeconomic data came in from the Hungarian economy in September, after the second wave of the coronavirus epidemic began to spread at a staggering rate in most European countries and Hungary.

Most European countries have resumed introducing restrictive measures, although most have not introduced such stringent measures as they did in spring, so they will have a significant impact on the EU economy. Hungary introduced a border closure in September, which immediately set back tourism that was just reviving. The lack of foreign guests is what hurts Budapest the most, affecting not only hotels, aviation and travel companies, but also spas, pubs and restaurants. According to CSO data, after the most favorable numbers in the summer, the number of overnight stays fell by 60% in September, that of foreigners decreased by 91%, while that of nationals decreased by 16% compared to the same period of the year. last year. This, then, clearly shows that tourism is once again the sector that was immediately worn down by the coronavirus epidemic, just as it was in the first wave. And the drastic decline will soon be reflected in employment, as there are no employment protection support programs (Kurzarbeit) in Hungary like the one we saw in the first wave.

Unemployment has risen and employment has fallen in September, although not yet significantly. Looking behind the data, it can be seen that the number of people working abroad and of public workers has decreased, but the CSO also regrouped some tens of thousands of newly unemployed in the field of the inactive (because they were laid off in To no avail, they didn’t meet the unemployment criteria, for example, because you haven’t been actively looking for work for at least a month. Regarding unemployment, we are likely to see negative trends again in the coming months, with the number of unemployed increasing by tens of thousands from month to month as the coronavirus epidemic worsens and restrictive measures intensify on the continent. By then, the number of unemployed could rise not only in tourism but also in many sectors if measures are not taken swiftly to protect jobs and halt the deterioration of business and household confidence.

As a result of the epidemic, companies become cautious, postpone investments and even decide to layoffs, while households can postpone their planned consumption. And this process is even more recessive, so it would be necessary to introduce fiscal stimulus measures in parallel with restrictive measures, to support job retention, so that the same thing as in tourism does not happen in all sectors of the economy.

Due to the growing caution of the population and the deterioration of the income situation, we can see a decrease in retail sales, the sector was still in the summer, but in September the volume decreased by 2% annually.

Once the total wage bill paid by the state and the companies cannot really increase, while prices will rise significantly, by 3-4%, the wage bill in real terms has even fallen for several months. And the uncertainty of the income situation and the growing fear of unemployment are leading people to try to increase their savings in preparation for worse times.

Although lax restrictive measures across Europe are aimed at preventing the economy from retreating (a lot), in more and more countries tighter closures are inevitable that will ultimately deepen the recession. As the epidemic grows, so do businesses and households, knowing that they are getting closer every day to tighter restrictions that threaten their jobs and use fewer services due to the epidemic. These trends can also be seen in Hungary’s import figures, which show a 2.4% decline in euro terms in September. The weakening in domestic demand can be explained by declining investment and cautious households, but it can also include the fact that less will have to be imported to produce weaker orders in the coming months. In contrast, exports have performed surprisingly well so far, with a year-on-year increase of 4.6%. This shows that although Europe has already moved aside in the first month of autumn, the demand for the products of the national factories is still strong, although it may well have been in part the filling of warehouses.

The good performance of exports is reflected in the fact that industrial production increased by 2.3% in September compared to the previous month. The volume of production increased in the subsectors of greater weight: the manufacture of vehicles and the manufacture of computer, electronic and optical products increased, while the manufacture of food, beverages and tobacco increased to a lesser extent. However, in most other manufacturing subsectors, production declined. Thus, the growth structure was no longer really balanced, the CSO was able to measure a drop outside some of the larger sectors, indicating that the impact of the coronavirus epidemic may be present in more and more areas.

According to the Purchasing Managers Index, the manufacturing industry cannot be expected to gain momentum in the coming months, but there may still be a stagnation on the deck. It can be wrapped up that the service sector is also suffering another recession, such as eg. Eg recent restrictions on nightclubs, cinemas and theaters are taking another portion of business revenue away through falling demand or, in some cases, excluding revenue sources altogether.

Towards the end of the year, as restrictions tighten, the entire continent could move towards a W-shaped recession. At best, countries that do not completely eradicate the coronavirus epidemic in the fourth quarter and do not need to take restrictive measures. Too strict to curb the virus in the long run may prevent another economic downturn. Most European countries do not seem to be able to avoid this, because normally either the virus has been released in one country or the restrictive measures introduced are beginning to slow down economic activity; perhaps both factors are having a negative effect at the same time.

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