economy grew by a meagre 1.4% year-on-year in the second quarter of 2007, the
Central Statistical Office (KSH) said on Tuesday.
economic growth figure was the lowest recorded since 1996 and well below the
expectations of analysts, who on the whole predicted gross domestic product
(GDP) would rise by over 2%. Hungary is in the middle of a tough fiscal
readjustment as the government attempts to reduce its massive budget deficit,
which at 9.2% in 2006 was by far the largest in the European Union. Hungary’s
GDP growth had been hovering around the 4% mark for years until the government
introduced its austerity measures.
Christensen, analyst at Danske Bank, said that Tuesday’s figures confirmed his
bank’s expectation that final GDP growth for 2007 would come in at under 2%.
However, he said that while the slowdown was worse than expected it was being
affected by global fears.
is particularly vulnerable to the global credit fears we are seeing because it
has a huge funding need,” he said. “It’s a shame the government didn’t take
these measures a year or two earlier as Hungary would have been better able to
withstand the global conditions.”
said that while the government was “doing the right thing” with its austerity
measures, the slowing growth would continue to hurt its popularity. Neighbouring Slovakia on Tuesday posted
economic growth of 9.2%, but Christensen said Hungary should not be too worried
by apparently falling behind the region.
slowdown will make more room for growth,” he said. “A lot of countries in
Central and Eastern Europe – Bulgaria, Romania and Slovakia – have not taken
the measures Hungary have and will be in a worse situation in a few years.”
has also rocketed due to the measures and the KSH said Tuesday that consumer
prices had risen 8.4% year-on-year in July 2007. This inflation figure is,
however, now on a downward trend.