The end of the Hungarian recession?

The big news of the day is that the Hungarian recession has ended. Well, this is technically true, that is, if the quick estimates prove to be correct. A common back-of-the-envelope definition of recession is two consecutive periods of shrinking GDP. By this definition Hungary was mired in recession throughout 2012. The Central Statistical Office (Központi Statisztikai Hivatal) now claims that GDP grew in the first quarter of 2013 by 0.7% when compared to the last quarter of 2012. Measured year over year–that is, comparing the first quarter of 2013 to the first quarter of 2012, however, Hungary has experienced a 0.9% decline in GDP. As Gordon Bajnai’s Együtt 2014-PM said, “a slower rate of decrease is not growth. It simply means that the decline is diminished somewhat.”

Needless to say, the government is ecstatic. András Giró-Szász, the government spokesman, announced that the government’s efforts have paid off. From here on there is no question that Hungary’s economy will grow rapidly. The somewhat surprising figure is considered to be an important watershed. Some right-wing papers compared the Hungarian figures to the disappointing news of the European Union’s deepening recession by pointing out that while the Hungarian figures are in positive territory, the EU reported a 0.7% decline. Yes, but the 0.7% decline must be compared to the Hungarian 0.9% decline on a year over year basis. And, by the way, few Hungarian newspapers bothered to report that Romania’s GDP grew by 2.1%.

therooftopblog.wordpress.com

therooftopblog.wordpress.com

Mihály Varga acted as if the government’s predictions made at the end of 2012 were right on target. They knew all along that 2013 would be a turning point, at least for economic growth. Considering how bad the budgetary and economic predictions of Varga’s ministry were, I take his claim with a grain of salt. Viktor Orbán himself predicted that 2013 would be “the year of reaping.” In February 2012 Orbán said that 2010 was the year of collaboration, 2011  the year of renewal, 2012 the year of take-off, and that 2013 would be the year of growth. Since 2012 wasn’t the year of take-off, Orbán’s prediction might be equally wrong for this year. Even the most optimistic predictions talk about only modest growth, under 1%.

One thing that is worrisome is the steep decline in industrial production over the last year. Although the overall decline was only 0.9%, industrial production was down by 2.9%.

An article that analyzes and tries to explain what these new GDP figures mean puts it this way: “Is it growth? Is it a decrease? Is it stagnation?”… None of the above.” After this introduction the author of the article explains that since growth is measured on a year on year basis, Hungary is not out of recession. It is troubling that the figures for the first quarter of 2013 are even worse than the truly terrible figures for the first quarter of 2012. The small growth over the last three months came largely from the building industry and agriculture, which is good news for the poorest section of Hungarian society. On the other hand, it is worrisome that industrial production hasn’t yet regained its 2010 level. Car production has declined and Hungarian-produced durable goods are down a staggering 30% compared to a year ago.

Let me add that the construction industry’s relative growth is most likely heavily influenced by government expenditures.  We have only to think of the billions spent on redesigning Kossuth Square in Budapest and building new football stadiums. If these projects are halted, the construction industry might fall back to its previous dismal performance.

There are also worrying signs as far as the budget is concerned. The cash registers that are supposed to report straight to the Hungarian equivalent of the Internal Revenue Service will not be functioning by July 1 as planned because of technical difficulties, and therefore the rather large amount of revenues that was supposed to come from this source most likely will never reach the treasury. The same problem exists with the e-toll scheme I wrote about earlier. In both cases the Hungarian companies who were chosen couldn’t come up with any acceptable solution.

Longer-term economic growth might be sacrificed for the sake of trying to keep the budget deficit under 3%. (Mind you, building useless stadiums or remaking Kossuth Square to resemble its 1944 self are not productive investments, although Orbán is especially infatuated with “a work-based economy.”) In part because of the heavy tax burden placed on them in an effort to shrink the budget deficit, multi-nationals aren’t exactly swarming into Hungary. And it’s highly unlikely that the small and medium-sized Hungarian businesses that the government is trying to promote can contribute enough to GDP to make up for government and foreign investment shortfalls. Hungary has yet to come up with a compelling growth plan, orthodox or unorthodox.

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28 comments

  1. The end of the recession? This is clearly something for Santa Claus.
    The real pity is that the formerly dry but accurate KSH (Central Statistical Office) as the last bastion of objective reporting has also caved in to “enhance” its figures to adjust the “basket” to let inflation look less conspicuous and to use what is easy and on hand. You can speak about “growth” once decline hit rock-bottom or from a dismal figure there is some difference upwards. But always ask yourself: From what level are you counting?

    If you have a barren island to whom a sole surviver of a ship disaster rescued himself, you have a population of 1. If another survivor makes it to the same island you have a population growth of 100%! But they are still only two people on a barren island. And for some reason, they may not even multiply.

    I think the news is that it cannot get any worse because it’s so bad already. But even that doesn’t have to be necessarily true, as statistical procedures and assumptions are changed – par ordre de mufti.

    And how do you factor in all the imponderables – external and domestic? I would swear on it if I had to, but not bet on it.

  2. The end of the recession? This is clearly something for Santa Claus.

    The real pity is that the formerly dry but accurate KSH (Central Statistical Office) as the last bastion of objective reporting has also caved in to “enhance” its figures to adjust the “basket” to let inflation look less conspicuous and to use what is easy and on hand. You can speak about “growth” once decline hit rock-bottom or from a dismal figure there is some difference upwards. But always ask yourself: From what level are you counting?

    If you have a barren island to whom a sole survivor of a ship disaster rescued himself, you have a population of 1. If another survivor makes it to the same island you have a population growth of 100%! But they are still only two people on a barren island. And for some reason, they may not even multiply.

    I think the news is that it cannot get any worse because it’s so bad already. But even that doesn’t have to be necessarily true, as statistical procedures and assumptions are changed – par ordre de mufti.

    And how do you factor in all the imponderables – external and domestic? I would swear on it if I had to, but not bet on it.

  3. The statements made in each of the five paragraphs of the above posts are logically challenging to me after multiple readings. Am I the only one left frustrated?

  4. The last few days I was travelling a lot around Budapest, and noticed that around Budapest are all kinds of traffic control, just as NAV (Tax and Customs) together with police checking out trucks (main roads to Budapest), the katastrofa vedelem together with police checking out something (mainly around Vaci ut), police on motor stopping and checking everything else in and around Budapest.

    Further, I noticed on 11 road to Budapest from Szentendre opposite of Hermes (next to a Renault car dealer, behind the fly over) a lot of police cars, army Land Rover Defenders and other vehicles are standing not moving at all.

    Anybody what is going on?

  5. So tell me Ron, do you believe the state should be “digging holes, making coffin(s), washing and dressing the deceased” ? Just who do you think would pay for this in the term? And, do you think that there is revolution in the air because of this?

  6. Romania did NOT grow by 2.1%. Only Latvia and Lithuania overtook Hungary in the EU in terms of GDP growth.

  7. A sad day for Eva! Hungary, a poor land-locked country, is doing reasonably well.
    You should reread what SWARC wrote here the other day. The arrogant tone of this HS by Eva needs a little reflection.

  8. Barbara Dowd :
    So tell me Ron, do you believe the state should be “digging holes, making coffin(s), washing and dressing the deceased” ? Just who do you think would pay for this in the term? And, do you think that there is revolution in the air because of this?

    Dear Barbara, I do not think that the State should be “digging holes, making coffin(s), washing and dressing the deceased” ? But they need to do it anyhow if other people are not able to do it or not be able to pay for it. Or do you want them to throw the bodies in the Danube, or leave them on the street?

    What I hate about this new law is that it will be implemented without proper (public) debate, and to the contrary to the Fidesz promise that they would take care of the poor people. So far they are the ones paying for it.

    And for your information up and till the year 2000 companies could pay for such funerals, by providing an interest free loan for funerals to the relatives. Unfortunately, Fidesz abolish this law in 2000. And again they did not provide an alternative and/or a period of adjustment.

  9. @ Ron

    “Or do you want them to throw the bodies in the Danube…”—It wouldn’t be the first time.

    @ Joe Simon

    “..doing reasonably well..” eh?

    Have you walked down a few streets in Pest and noted how many shops have closed? I guess those people
    found their Nirvana by getting a cigarette concession, eh?

    It’s for people like you that they painted that medieval picture where the blind are leading the blind.
    When you wake up, Budapest will be a wasteland–and that won’t take all that long–but you can always take a speed train out to Felcsut and catch a soccer game.

  10. 1. Somebody, please, explain to me how the Statistics Office created -0.3% adjusted data from the -0.9% raw data, if there were 62 working days in q1 2013 and 64 in q1 2012. Please…

    2.
    Among the neighboring countries Austria, Slovakia, Romania grew in 2012, Slovenia, Croatia and Serbia shrank together with Hungary.

  11. Hungarians are the absolute proof that there are extra-terrestials!
    After 20,000 years who could believe that the human race could remain so ignorant?
    Hence, Shakespeare, Mozart, DaVinci and others had to be genetically modified humans!
    Since Hungarians–by their own admission–are the creme de la creme of humanity, there’s precious little one can expect from this ‘failed experiment’.

    Long live UFOs!

  12. tappanch :
    1. Somebody, please, explain to me how the Statistics Office created -0.3% adjusted data from the -0.9% raw data, if there were 62 working days in q1 2013 and 64 in q1 2012. Please…

    How, I cannot explain, for this we need to review the exact calculations and supporting documentation. As to the fluctuation that can be due to overlapping (as to period) posts, such as income that should be in a different period, investments same principle applies. The EU agreed some standards, which is called the national accounts and they are used for statistic purposes, among other things.

    http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/National_accounts_%E2%80%93_GDP

  13. Johnny Boy: Of course, if you compare ANNUAL growth of Romania with Hungary’s QUARTERLY, then yes…

    Annual growth 1st qtr 2013 compared to 1st qtr 2012:
    Hungary –0.3%
    Romania 1.3%

    4th Quarter 2012 compared to previous qtr
    Hungary -0.4
    Romania 0.4

    1st quarter 2013 company to previous qtr
    Hungary 0.7
    Romania 0.5

    http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-15052013-AP/EN/2-15052013-AP-EN.PDF

    Based upon the above Hungary is in recession, and Romania not.

    JB are you happy now?

  14. I understand that you suffer, Balogh. It’s a pity that Eurostat confirmed the growth figures for Hungary, isn’t it? While under your guys, the Hungarian Central Office for Statistics lied through its teeth to Eurostat that upbraided the former. But you will suffer even more in August when the next set of data will come out.

  15. @Dumb-ar
    Professor Balogh does not “suffer”, she has an excellent job at one of the most prestigious universities and enjoys her job – writing about Hungary and its history.

    Hungary, on the other hand, suffers from widespread spinelessnes and dumbness.

  16. @ Dumb…and Dumber

    As most of us have suspected, Hungary leads the world in idiocy.
    They’re also the leaders in ill-will; and sheer primitive cruelty.

    What a triacta!

    (Hajra Mogyorok!!)

  17. Ron: “NAV (Tax and Customs) together with police checking out trucks”

    Probably, intelligence was gathered on a pending uprising.
    Poor Orban will try to crush the demonstrators.
    What a fool!

  18. 1st quarter 2013 company to previous qtr
    Hungary 0.7
    Romania 0.5
    http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-15052013-AP/EN/2-15052013-AP-EN.PDF
    Based upon the above Hungary is in recession, and Romania not.
    JB are you happy now?

    This is the only relevant pair of numbers now.
    See that you can get rid of the 2.1% and sit back on the real 0.5?
    Good.
    Older growth numbers have no value now as they have been known for months. What is new here is the Q1 2013 which, against the wishes of you anti-proponents, is 3rd best in the whole EU and the best in the region.

  19. tappanch :
    @Dumb-ar
    Professor Balogh does not “suffer”, she has an excellent job at one of the most prestigious universities and enjoys her job – writing about Hungary and its history.
    Hungary, on the other hand, suffers from widespread spinelessnes and dumbness.

    …and you probably wonder why such disgusting anti-Hungarian sentiments make you hated in Hungary.

  20. @Johnny Boy:
    Anti Fidesz is not anti Hungarian just as
    Anti Nazi was not anti German …
    But of course you’ll never get it, silly boy!

  21. @ Johnny Boy. There was once a troll named Johnny Boy, wasn’t there? Quoting Paul: Don’t feed the trolls!

    BTW, Hungarian economic growth is not at all a settled matter yet. First you have to see from what level you grow (it may just be a dent in the decline). Second, is everybody certain that Hungary doesn’t cook the books? I mean they lie about everything else, and they want to show growth so badly.

    What should us abroad convince that there is any growth?

    At any rate, the Hungarians in Hungary I know haven’t seen any growth yet.

    And no attacks against Prof. Éva Balogh, please! She is doing the most conscientious, wonderful job that even trolls could appreciate – if they had a trace of intelligence in them.

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