Macroeconomic and fi nancial environment in 2013 · 10 OTP Bank Annual Report 2013 Macroeconomic...
Transcript of Macroeconomic and fi nancial environment in 2013 · 10 OTP Bank Annual Report 2013 Macroeconomic...
10 OTP Bank Annual Report 2013
Macroeconomic and fi nancial environment in 2013
M A C R O E C O N O M I C A N D F I N A N C I A l D E V E l O P M E N T S I N h U N G A R Y
In 2013, hungary’s economy was shaped by
weak external demand, supportive money
market environment, and the stabilization of
domestic demand. A fragile quarter-on-quarter
recovery began in the eurozone, but the area’s
2013 GDP contracted in year on year terms,
chiefl y because of the peripheral countries.
The eurozone’s weak recovery had an adverse
eff ect on export-driven economies, causing most
countries in the CEE region to slow down.
Nevertheless, money markets were helpful,
as the Bank of Japan embarked on a major
stimulus programme in March, following the
Fed’s example. The huge excess liquidity resulted
in a permanent, albeit interrupted, capital infl ux
into emerging economies’ bond markets.
In 2013, hungary’s economy grew by 1.1%,
recovering from its 1.7% contraction in 2012.
looking at the expenditure side, net exports
remained vital to bolstering growth, but the fi rst
signs of improvement in domestic demand have
already come into sight.
Even though investments dropped in year-on-
year terms, a quarter-on-quarter growth began
in the second half of the year.
At this point, the recovery is chiefl y linked to the
EU funds that surged at the end of the seven-
year budget period, to the fl ood protection
investments, and to other publicly fi nanced
projects.
The private sector’s investment activity
remained subdued.
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–4
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8
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2005
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2006
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2011
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2013
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Consumption expenditure of households Government consumption Gross fixed investment Inventories Net export GDP
Hungary’s GDP growth, expenditure side (%)
Sources: HCSO, OTP Research
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0
2
4
6
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0
2
4
6
Agriculture Industry Construction Market ServicesGovernment services Taxes on production less subsidies GDP
2005
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2006
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2007
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2007
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2008
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2010
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2010
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2012
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2012
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2013
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2013
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/Q3
Hungary’s GDP growth, production side (%)
Sources: HCSO, OTP Research
11Macroeconomic and fi nancial environment in 2013
Consumption also seems to have bottomed out.
The key labour market statistics signify major
improvement, while the indices that exclude
the eff ect of public work schemes indicate
a smaller rate of advance, but households’
income position clearly improved last year.
Private sector wages grew by 3–4%, while
the government raised pensions and public
employees’ wages at a slightly higher rate
than the near 5% infl ation that had been
expected at the beginning of the year.
Given the strong disinfl ation in 2013, which
was supported by the cut in retail utility tariff s,
the real value of households’ disposable income
could meaningfully increase. Although this
did not raise households’ fi nal consumption
expenditure by the same rate because of the
persisting uncertainty on the labour market,
the almost steady fall that started in 2006
seems to have ended.
In a huge fall, infl ation came down to 1.7%,
from 5.7% a year earlier. The government
measures’ (e.g. utility rate cuts vs. the duty
on fi nancial transactions, higher excise tax)
eff ect of infl ation was practically zero.
But the subdued domestic demand,
the decline in commodity and food prices,
and the 27% VAT rate’s drop from the base
have signifi cantly reduced infl ation
in hungary.
The above facts gave underlying principle
of the National Bank of hungary’s statements
issued after the rate cut decision each month.
In the fi rst half of the year, the benchmark rate
was trimmed in 25 basis point steps, then
a 20-basis-pont lowering sequence started
in August, which led the benchmark rate to 3%
by the end of year.
Thanks to the supportive global environment
(ample liquidity), government bond yields
followed the rate cuts in the fi rst half of 2013,
but long-term yields decoupled from the central
bank’s base rate in the summer.
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Base rate HUF/EUR8
7
6
5
4
3
2
320
310
300
290
280
270
260
HUF/EUR and base rate
Sources: Reuters, MNB, OTP Elemzés
3Y 5Y 10Y 15Y
3
4
5
6
7
8
9
10
11
3
4
5
6
7
8
9
10
11
Government bond yields (%)
Sources: ÁKK, OTP Research
04.2012 07.2012 01.201310.2012 04.2013 10.2013.07.2013.01.2012
12 OTP Bank Annual Report 2013
13
Because of the major central banks’ monetary
stimulus programmes, and owing to hungary’s
encouraging external balance indicators, the
forint was not under signifi cant pressure in
2013. hungary’s current account surplus
exceeded 3% of GDP, and its net fi nancing
capacity surpassed 7% of GDP last year.
No wonder that the rapid deceleration of
external indebtedness continued: gross external
debt fell to 89% of GDP, down from 100%.
Nevertheless, the hungarian currency steadily
depreciated versus the euro throughout 2013,
by an average of more than 2%.
Macroeconomic and fi nancial developments in the countries of OTP Bank’s foreign subsidiaries
Because of the weak domestic demand, net
exports remained the main engine of growth
in most countries. however, the eurozone’s
slow growth had an adverse eff ect on other
countries of the CEE region too; only Romania
could achieve exceptional growth, Serbia’s and
Montenegro’s GDP might have increased by
2%, while the growth in other countries where
OTP has presence was 0–1.3%. Croatia’s GDP
contracted further. The positive development
in most countries is the declining infl ation, but
fi scal adjustment measures have not borne fruit
for the budget balance in all countries yet.
looking at the banking market, Central and
Eastern Europe’s countries remained largely
diverse. Both retail and corporate loan stock
grew in Russia, Ukraine, and Montenegro.
Net lending, both retail and corporate, was
negative in Romania and Croatia. In most of
the remaining countries, net lending to the
household sector was positive, while the debts
non-fi nancial corporations repaid were bigger
than the loans they took out.
Macroeconomic and fi nancial environment in 2013
5
10
15
20
25
30
35
40
45
2006 2007 2008 2009 2010 2011 2012 2013
Hungary
Russia
Ukraine
Bulgaria
Romania
Slovakia
Croatia
Serbia
Montenegro
Banking system’s retail loan penetration(as % of GDP)
Sources: National bank, OTP Research
5
15
25
35
45
55
65
2006 2007 2008 2009 2010 2011 2012 2013
Banking system’s non-financial corporateloan penetration (as % of GDP)
Sources: National bank, OTP Research
Hungary
Russia
Ukraine
Bulgaria
Romania
Slovakia
Croatia
Serbia
Montenegro