Lately a fair amount of good news is coming from Hungary on the economic front. The GDP growth, the public debt, the current account surplus, and the exchange rate of the national currency, the forint all performed better than previously expected. Is this a real turnaround or previous estimations and opinions about Hungary were just way too pessimistic?
On January 17, 2012, the Eastern Approaches (the editorial blog of The Economist) reported the following while the forint traded at 313 ft/euro:
But Société Générale is already advising investors to sell forints, predicting that the currency may slide to as low as 325 against the euro. (It briefly hit 324 earlier this month.)
On January 23, 2012 Société Générale stayed pessimistic even though the forint was near 300 ft/euro at this time, they urged investors to sell forints as quickly as possible.
Today, on February 17th, the forint right now is trading under 290 ft/euro, which is a good deal stronger than its value at the time of the above warnings. The forint would need to weaken 3.4% to be at 300 again, and it would need to weaken more than 12% to “slide to as low as 325 against the euro.” as SG warned. A remarkable gain especially considering the central Bank’s decision to keep rates steady at 7% and avoiding further rate hikes , which would have presumably strengthened the forint even more.
According to latest data, Hungary’s public debt decreased by the end of 2011 to 80.3% of GDP . Down from 81.3% a year ago, but more interestingly, fresh data shows that the debt record was reached at 85.2% in Q2 2010, (under the Bajnai government). You can read the full report about the latest GDP to debt figures here.
In 2012 January, the debt figures continued to impress. These latest numbers cannot be compared to the GDP yet, but the gross public debt decreased significantly in the first month of 2012 by HUF 430 billion according to official ÁKK statistics. Total Public debt was 21,426.1 billion in November 20,955.5 billion in December and only 20,526.7 billion in January. ÁKK’s data is always calculated for the last day of the relevant month.
The Wall Street Journal reported on the latest Hungarian GDP figures, saying “Hungary 4Q GDP Surprisingly High”. The fourth quarter growth was 1.4% on the year vs 0.8% forecast, while the growth during the full year 1.7% unadjusted. Better than expected numbers in construction helped the GDP in Q4.
The surplus of the current account which is another important factor for the Hungarian economy hit some good numbers in 2011. Although the figures for the full year are not available yet, 2011 Q2 posted the largest quarterly current account surplus on record for Hungary, $1 billion. While the surplus is not that large in absolute terms, what makes it significant is the fact that Hungary posted huge current account deficits every year from 1993 to 2008 and now it seems that the country could reliably stay in surplus for 2011.