| Prospects for Hungarys economy for next year are gloomy and recession is looming, think-tank GKI said in a highly critical monthly report. GKI reiterated its 2011 economic growth forecast of 1.5% and said economy will contract by 1% next year. Assessing the current economic situation, GKI pointed that downturn is observed in many sector. Domestic industrial sales are stably declining, construction is deteriorating and no recovery could be expected in the coming year. The only positive signs come from the external sector, but the expected slowdown in the European economic activity will determine foreign trade. The external balance will remain favourable, as the falling private consumption in 2012 will reflect in restricted imports growth. Investments will decrease by 2% y/y in 2011 and stagnate in 2012. The consumer price growth is seen to accelerate and vary between 4%-5% in 2012, well above the 3% inflation-target. Regarding the fiscal sector, GKI notes the positive balance this year will be achieved only due to transferred pension fund assets and sets a 2.9% of GDP deficit as a 2012 projection, again worse than the 2.5% planned by the government. It notes however that due to strong international pressure, the deficit will be kept below 3% of GDP. Employment will slightly increase in 2011, but substantial lay-offs in the public sector could be expected in 2012 as a result of announced restructuring programmes. The unemployment rate will stand at 11% and 10.8% in 2011 and 2012, respectively. |
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