Periscope - MFB · Sources: European Commission, MFB-300%-150% 0% 150% 300% 450% 600% 750% 0 50 100...
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Periscope Hungarian Development Bank’s monthly report September 2014 Authors: Erzsébet Gém Chief economist Álmos Mikesy ([email protected]) Zsolt Szabó ([email protected]) Publisher: MFB Hungarian Development Bank Private Limited Company Editor in chief: Erzsébet Gém Contact: Nádor utca 31. H-1051 Budapest Tel.: +36 1 428 1772 Web: www.mfb.hu The views expressed in the analyses published by MFB Plc reflect the authors’ personal views and do not correspond in any circumstances to the Bank official views. The analyses are based on data obtained from credible sources but the authors do not take responsibilities for their authenticity. MFB Plc and the authors are not responsible for the accuracy of the forecasts. Focus Consumer confidence in Hungary After climbing to an eight-year record high in Spring this year, the consumer confidence index in Hungary declined somewhat from Q2 onward. Among other reasons, this could have been due to post-election adjustment, which can be considered natural (it was observed after previous elections as well), and an increasingly gloomy perception of the situation by people in lower wage categories, the latter being due in part to the end of the Winter public works programme. However, the current level of the sentiment index is still not low enough to jeopardise the continued growth in household consumption that is expected in the second half of the year. In April 2014, consumer confidence in Hungary hit an eight-year record high, and then began a slow decrease. However, the country is not alone in the Central and Eastern European region with its population’s increasingly pessimistic outlooks: with the exception of Slovakia, all of the Viseg- rád countries saw expectations decline, and Romania, too, experienced a sudden halt in its dynamic growth in late Summer (Chart 1). However, despite the slowdown, the Hungarian sentiment index continues to be in a phase of recovery (Chart 2), which could (along with a dynamic wage outflow, a low-inflation environment and an improving labour market situation) represent an important supportive factor for growth in household consumption expenditure over the coming period. After a 1.7% growth in Q1, the latter already saw a 2.4% increase on an annual level between April and June. (continued on page 2) ῳ Hungarian economic acceleration continues in Q2... (Page 3) ῳ Favourable domestic balance due in part to a persistently high foreign trade surplus... (Page 4) ῳ Investments in the Hungarian economy continue their dynamic growth in Q2... (Page 5) ῳ Hungarian industry facing increasingly serious external risks... (Page 6) ῳ Stirring on the housing loans market in July... (Page 7) ῳ Unemployment rate in Hungary below 8.0%... (Page 8) ῳ Crude oil prices on the global market continue to plummet in August... (Page 9) ῳ Planned elimination of retail foreign-currency loans already showing its effect in banking indicators... (Page 10) ῳ Demand for HUF loans boosted by the increasingly favourable prices of the credits... (Page 11) ῳ Forint exchange rate against key foreign currencies at over two-year levels in August... (Page 12) ῳ Budget revenue growth overtaking expenditure growth in the second half of the year... (Page 13) Content -70 -60 -50 -40 -30 -20 -10 0 10 -70 -60 -50 -40 -30 -20 -10 0 10 03.2007 06.2007 09.2007 12.2007 03.2008 06.2008 09.2008 12.2008 03.2009 06.2009 09.2009 12.2009 03.2010 06.2010 09.2010 12.2010 03.2011 06.2011 09.2011 12.2011 03.2012 06.2012 09.2012 12.2012 03.2013 06.2013 09.2013 12.2013 03.2014 06.2014 Poland Czech Republic Slovakia Hungary Romania Chart 1: Consumer confidence* in Central and Eastern Europe Sources: European Commission, MFB * seasonally adjusted data 01.2008 01.2009 01.2010 01.2011 01.2012 01.2013 08.2014 01.2014 -40 -30 -20 -10 0 10 20 30 40 50 -80 -60 -40 -20 0 Yearly change in consumer confidence index (point) Consumer confidence index Long-term average (1992-2012) Upswing Chart 2: Consumer confidence cylcle Dowturn Sources: European Commission, MFB Sources: NBH, MFB
Transcript of Periscope - MFB · Sources: European Commission, MFB-300%-150% 0% 150% 300% 450% 600% 750% 0 50 100...
PeriscopeHungarian Development Bank’s monthly report
Sep
tem
ber
20
14
Authors:
Erzsébet Gém Chief economistÁlmos Mikesy ([email protected])Zsolt Szabó ([email protected])
Publisher: MFB Hungarian Development Bank Private Limited CompanyEditor in chief: Erzsébet GémContact: Nádor utca 31. H-1051 BudapestTel.: +36 1 428 1772 Web: www.mfb.hu
The views expressed in the analyses published by MFB Plc reflect the
authors’ personal views and do not correspond in any circumstances
to the Bank official views. The analyses are based on data obtained
from credible sources but the authors do not take responsibilities for
their authenticity. MFB Plc and the authors are not responsible for the
accuracy of the forecasts.
F o c u sConsumer confidence in Hungary
After climbing to an eight-year record high in Spring this year, the consumer confidence index in Hungary declined somewhat from Q2 onward. Among other reasons, this could have been due to post-election adjustment, which can be considered natural (it was observed after previous elections as well), and an increasingly gloomy perception of the situation by people in lower wage categories, the latter being due in part to the end of the Winter public works programme. However, the current level of the sentiment index is still not low enough to jeopardise the continued growth in household consumption that is expected in the second half of the year.
In April 2014, consumer confidence in Hungary hit an eight-year record high, and then began a slow decrease. However, the country is not alone in the Central and Eastern European region with its population’s increasingly pessimistic outlooks: with the exception of Slovakia, all of the Viseg-rád countries saw expectations decline, and Romania, too, experienced a sudden halt in its dynamic growth in late Summer (Chart 1).However, despite the slowdown, the Hungarian sentiment index continues to be in a phase of recovery (Chart 2), which could (along with a dynamic wage outflow, a low-inflation environment and an improving labour market situation) represent an important supportive factor for growth in household consumption expenditure over the coming period. After a 1.7% growth in Q1, the latter already saw a 2.4% increase on an annual level between April and June. (continued on page 2)
ῳ Hungarian economic acceleration continues in Q2... (Page 3) ῳ Favourable domestic balance due in part to a persistently high foreign trade surplus... (Page 4) ῳ Investments in the Hungarian economy continue their dynamic growth in Q2... (Page 5) ῳ Hungarian industry facing increasingly serious external risks... (Page 6) ῳ Stirring on the housing loans market in July... (Page 7) ῳ Unemployment rate in Hungary below 8.0%... (Page 8) ῳ Crude oil prices on the global market continue to plummet in August... (Page 9) ῳ Planned elimination of retail foreign-currency loans already showing its effect in banking indicators... (Page 10) ῳ Demand for HUF loans boosted by the increasingly favourable prices of the credits... (Page 11) ῳ Forint exchange rate against key foreign currencies at over two-year levels in August... (Page 12) ῳ Budget revenue growth overtaking expenditure growth in the second half of the year... (Page 13)
Content
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Poland Czech Republic Slovakia Hungary Romania
Chart 1: Consumer confidence* in Central and Eastern Europe
Sources: European Commission, MFB
* seasonally adjusted data
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Consumer confidence index
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Upswing
Chart 2: Consumer confidence cylcle
Dowturn
Sources: European Commission, MFB
Sources: NBH, MFB
Periscope
Periscope September 20142
The sudden standstill in the rise of the consumer confidence index was primarily caused by fears of unemployment. Additionally, the population’s assessment of its general economic and own financial situation also became less optimistic, and this was only partially offset by the improvement in savings opportunities (Chart 3). However, it is worth noting that mounting concerns over deteriorating household finances (Chart 4) and rising unemployment were observed solely among the least well-off families. This represents a break in the trend that has been going on since Q1 2013, namely that a general improvement in the consumer environment (low inflation, ameliorating labour market conditions, etc.) leads to more optimistic outlooks in every income category.The decline in household financial situations (and in related expectations) could have been due in part to the fact that while the results of the government’s overheads cuts were proportionally the most visible in the expenditure structures of the lowest income categories (i.e. that is where the proportion of such expenditure decreased at the highest rate; Chart 5), the overall positive impact of all this on consumption was diminished by the fact that these groups of society benefited the least from the improving economic situation. While 2013 per capita monthly consumption expenditures rose at a rate exceeding last year’s inflation rate in the 4th and 5th quintile (with expenditure growing by 1.5% and 0.7%, respectively, at real value), consumption in the three lower quintiles contracted by 0.8%, 1.8% and 0.6% at real value, respectively.Mounting concerns over unemployment in the lower income categories could have been related to the progression of the public works programme: with the slowdown in the public works ‘boom’ seen at the end of 2013 and in early 2014 thanks to new Winter training programmes, the employment prospects of participants grew increasingly uncertain (Chart 6). Expectations regarding trends in the general economic environment over the next one-year period also hit an eight-year peak in April this year, while the population’s assessment of the previous 12 months has not been this positive since January 2003. However, starting with Q2, this optimism faded (Chart 7), which could have been caused by a number of factors: similarly to previous election periods, household expectations were adjusted, geopolitical tensions (the Russia–Ukraine conflict in particular) exacerbated existing uncertainties, and in a deteriorating external environment the forint exchange rate began to weaken once again, with the Hungarian currency’s euro exchange rate standing persistently at 310 HUF/EUR as of late July.
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Chart 3: Components of the Consumer confidence index (q/q)
Sources: European Commission, MFB
*for the next 12 months
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Chart 4: Expectation of the household's financial situation over the next 12 monthy by income groups
Sources: European Commission, MFB
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Lowest 20% Highest 20% All householdsFood and non-alcoholic beverages Housing, household energyTransport CommunicationOther
Chart 5: Consumption expenditure of householdsby the main groups
Sources: HCSO, MFB
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Chart 7: Assessment of the general economic situation over the last 12 months and expectation for the next 12 months
Sources: European Commission, MFB-300%
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Sources: HCSO, MFB
Chart 6: Number of fostered workers in Hungary
Periscope
Periscope September 20143
GDP growthHungarian economic acceleration continues in Q2• According to the latest survey of the German IFO Institute, both the evaluation of the current global economic situation and
expectations regarding the future saw a slight improvement in Q3 (see Chart 1). Growth-related risks, on the other hand, got worse over the past months, with the economic impact of geopolitical tensions (mainly the Russia–Ukraine conflict) becoming more and more noticeable. After a sudden halt due to the bad weather early this year, the US economy recorded a growth of 2.5% (year-on-year) in Q2. China’s GDP grew by 7.5%, while the eurozone and Germany managed growth rates of 0.7% and 1.3%, respectively (Chart 2).
• The Hungarian economy grew by 0.8% compared to the previous quarter and by 3.7% on an annual level between April and June 2014, delivering exceptional performance even in European comparison, and continuing its catching up with the European Union average that began in 2013 (Charts 3–4).
• On the production side, all sectors contributed to GDP growth, while on the final use side of gross domestic product the drivers of growth were mainly investments and, to a lesser extent, household consumption (Charts 5–6).
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Chart 3: GDP growth in Q2 2014 in the European Union*(year/year**)
Sources: Eurostat,
MFB
* Denmark, Ireland, Croatia, Luxembourg, Slovenia: data is not available;** seasonally adjusted data
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Chart 4: GDP growth* in Hungary
Sources: HCSO, MFB
* seasonally and calendar effect adjusted data
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Chart 2: GDP growth in certain area of the global economy (y/y)
Sources: Reuters, MFB20
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Economic expectations (by the end of the next 6 months)Current economic situation
Chart 1: World economy climate
Sources: Ifo World Economy Survey (WES), MFB
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Chart 5: Contribution to the Hungarian GDP (y/y)
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Chart 6: Contribution to GDP growth (y/y)
Sources: HCSO, MFB
Periscope
Periscope September 20144
Foreign trade, current accountFavourable current account balance due in part to a persistently high foreign trade surplus• Despite increasingly serious geopolitical risks, the growth of world trade picked up in Q2 this year (Chart 1). Hungarian ex-
port and import volumes grew by 9.5% and 9.3% (year-on-year), respectively, in June 2014, while the overall growth rate in the first half of the year was 8.2% and 8.5%, respectively (Chart 2).
• The balance of trade surplus amounted to HUF 1 010.1 billion or EUR 3 284.0 million between January and June 2014, which is HUF 84.8 billion or EUR 187.0 million higher than one year previously (Chart 3). With an import growth of 7.3% and an ex-port growth of 6.7%, net export did not contribute to growth in the second quarter (Chart 4).
• The current account surplus diminished to HUF 90.9 billion in June 2014: this was related to the decrease (outflow) of primary revenues, more specifically revenues related to direct and portfolio investments, which was offset only partially by the high goods and services trade surplus (HUF 284.0 billion). In the financial account, the government deficit (HUF -144.3 billion) was offset by the savings (HUF +191.0 billion) of other sectors (corporate sector, population) (Charts 5–6).
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Chart 5: Monthly changes in the Hungarian current account
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Chart 1: Outlook of the world economy (OECD CLI) and the world export (y/y)
* OECD Composite Leading Indicator: OECD members + Brazil, China, India, Indonesia, Russia, South Africa
Sources: CPB, OECD, MFB
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Chart 6: Monthly changes in the Hungarian financial account
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Chart 2: External trade volume in Hungary
Sources: HCSO, MFB
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Chart 4: Net export's contribution to the Hungarian GDP growth (y/y)
Sources: HCSO, MFB
Periscope
Periscope September 20145
InvestmentsInvestments in the Hungarian economy continue their dynamic growth in Q2• After a sharp increase of 22.6% in Q1, investment volumes on an annual basis increased by 21.6% between April and June,
while the growth rate of gross fixed capital formation (year-on-year) accelerated from 13.9% to 18.7% (Chart 1).• As a result of dynamic investments, the investment rate for the last four quarters as a percentage of the GDP peaked at a
four-year high of 18.7%, exceeding the Polish indicator for the first time in five years (Chart 2).• Private sector investments (+21.7% year-on-year) have been recording more dynamic growth than state investments (+16.4%)
for two successive quarters now (Chart 3), which is due in part to the accelerated disbursement of EU funds (Chart 3).• Investments were up strongly in the manufacturing, construction and agriculture between April and June, while investments
in education experienced a major downturn (Chart 4).• The gradual increase in the rate of industrial capacity usage over the past three years could lend further impetus to investments
in the coming quarters (Chart 5), but the likely contraction in the volume of community funds and the decline in orders due to European recovery (Chart 6) will likely impede this dynamism.
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2013
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2013
Q1
2014
Q2
2014
Q3
2014
Hungary Czech Republic Poland Romania Slovakia
Chart 5: Capacity utilization in manufacturing
Sources: Eurostat, MFB
32.8%
12.2%
21.2%-37.5%
-0.2%
8.0%
8.2%
9.2%
28.5%
33.3%
36.1%
36.6%
-40% -20% 0% 20% 40% 60% 80%
Of which: Machines, vehiclesOf which: Construction
EducationReal estate activities
Wholesale and retail tradeElectricity, gaz, steam
ICT sectorConstruction sector
ManufacturingTransportation, storage
Agriculture
Q2 2014 Q1 2014
TOTAL
Chart 4: Investment volume (y/y) in the main sectors
Sources: HCSO, MFB
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
-30%
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Q1
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2011
Q1
2012
Q3
2012
Q1
2013
Q3
2013
Q1
2014
Business sector* (y/y) Budgetary institutions (y/y)
Chart 3: Investment activity in the public andbusiness sector in Hungary
* corporations with more than 49 employees
Sources: HCSO, MFB
15%
20%
25%
30%
35%
15%
20%
25%
30%
35%
Q2
2004
Q4
2004
Q2
2005
Q4
2005
Q2
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Q2
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Q4
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Q2
2012
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Q4
2013
Q2
2014
Hungary Czech Republic Poland Slovakia Romania
Chart 2: The gross fixed capital formation to GDP ratio*in Central Eastern Europe
Sources: Eurostat, HCSO, MFB * 4-quarter rolling average
-40%
-30%
-20%
-10%
0%
10%
20%
30%
-40%
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-20%
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0%
10%
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30%
Q1
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Q1
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Q2
2014
Hungary Czech Republic Poland Slovakia Romania
Chart 1: Gross fixed capital formation inCentral and Eastern European countries (y/y)
Sources: Eurostat, HCSO, MFB
* not seasonally adjusted data
-15%-12%-9%-6%-3%0%3%6%9%12%15%18%
-60-50-40-30-20-10
01020304050
Q4
2009
Q1
2010
Q2
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2013
Q1
2014
Q2
2014
Q3
2014
Consumer goods* (LHS) Intermediate goods* (LHS)Investment goods* (LHS) Investments* (RHS)
Chart 6: New orders and gross fixed capital formation (y/y)
Sources: European Commission, HCSO, MFB
* 4-quarter rolling average
prop
orti
on o
f co
mpa
nie
s ex
pect
ing
rise
min
us
prop
orti
on o
f co
mpa
nie
s ex
pect
ing
dro
p (p
erce
nta
ge p
oin
t)
Periscope
Periscope September 20146
Industry and constructionHungarian industry facing increasingly serious external risks• In Q2 2014, the gross added value of the industry grew by 7.2%, while that of construction by 19.1% (year-on-year),
meaning that the contributions of these sectors to GDP growth reached 1.6% and 0.6%, respectively (Chart 1). • Industrial production increased by 1.8% (m/m) and by 11.3% (y/y) in June 2014 (Chart 2). Preliminary data indicate a growth
rate of 12.3% (y/y) for July 2014. The performance of the strongly export-oriented manufacturing industry was up by 11.1% in H1, even the textile industry (which represent a low proportion of industrial production) managed close to 20% growth alongside the main driver, vehicle manufacturing. However, a major risk to the performance of the sector in H2 is the negative turn in the external environment, which is already now noticeable in the volume of orders (Charts 3–5).
• Construction industry performance was up by 9.8%(y/y) in June 2014. The slowdown compared to the more than 20% growth rates of the previous months was due in part to basis effects. The volume of new orders has been on a downward slope (on an annual basis) for two months now, which represents a risk: the housing market is still weak, meaning that it is crucial for the future of the sector that payments in the new EU budgetary cycle are initiated as soon as possible (Chart 6).
-15%
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Month/month (RHS) Year/year (LHS) Sources: HCSO, MFB
Chart 2: Industrial production* in Hungary
*seasonally and calendar adjusted data
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
75
80
85
90
95
100
105
110
115
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IFO index: business expectations (LHS)
Manufacturing production (y/y, RHS)
Chart 4: German business expectations (IFO index) and Hungarian manufacturing production
Sources: HCSO, CESifo, MFB
IFO index: adv. 3 months
111.1%
98.8%
101.8%
102.5%
103.1%
106.0%
107.4%
107.5%
108.6%
111.3%
112.1%
118.6%
126.4%
90% 100% 110% 120% 130%
TOTAL MANUFACTURING
Computer, electronic prod.
Other manufacturing
Manuf. of machinery
Manuf. of pharmaceuticals
Rubber and plastic prod.
Food, beverages, tobacco
Electrical equipments
Wood and paper prod.
Metal prod.
Chemical prod.
Textiles, leather prod.
Transport equipment
Chart 3: Production* of the manufacturing sub-sectors(January - June 2014)
Sources: HCSO, MFB
* the same period of the last year = 100%
-20%-15%-10%-5%0%5%10%15%20%25%30%35%
-80%-60%-40%-20%
0%20%40%60%80%
100%120%140%
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Stock of orders at the end of the month* (LHS)New orders* (LHS)Construction output* (RHS)
Chart 6: Construction production and orders (y/y)
Sources: HCSO, MFB
* 3-month rolling average
-10%
-8%
-5%
-3%
0%
3%
5%
-10,0
-7,5
-5,0
-2,5
0,0
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Q1
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Q1
2014
Q2
2014
perc
enta
ge p
oint
Industry (LHS) Construction (LHS) GDP (RHS)
Chart 1: Industry and construction sector's contribution to GDP growth (y/y)
Sources: HCSO, MFB
-20%
-10%
0%
10%
20%
30%
-20%
-10%
0%
10%
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30%
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Export orders* Domestic orders* Domesic sales* Export sales*
Sources: HCSO, MFB
Chart 5: Manufacturing sales and orders (y/y)
* 6-month rolling average
Periscope
Periscope September 20147
ConsumptionStirring on the housing loans market in July• Between April and June 2014 (y/y), Hungarian households’ consumption expenses grew (+2.4%) at an even faster pace
than in the first quarter (+1.7%), with actual consumption contributing a total of 1.0 percentage point to growth (Chart 1). • Consumer confidence has so far been unable to return to the optimistic levels seen early this year, and the sentiment index
was back to the late 2013 level as a result of the drop recorded in August 2014 (Chart 2). Retail sales were up by 6.1% in H1, with preliminary data indicating a growth rate of 2.3% for July (Chart 3).
• Wage outflow remains rapid, with both net and gross earnings up 5.7% (y/y) in the first half of the year (Chart 4). • The decline in household savings seen in May proved temporary, as the growth in Hungarian households’ assets continued in
both June (HUF +187.1 billion) and July (HUF +101.0 billion): the primary forms of savings in this low-interest environment continued to be investment funds and government bonds (Chart 5). Repayments continue to exceed the volume of new loans on the retail loans market, but there has been an upturn in housing loans, with HUF 26.2 billion worth of new loans being granted in July, the highest amount since March 2004 (not counting the period of final payments) (Chart 6).
-350-300-250-200-150-100-50050100
-700-600-500-400-300-200-100
0100200
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HU
F bi
llion
HU
F bi
llion
Loans denominated in foreign currencies (LHS)HUF loans (LHS)Total loans (RHS)
Chart 6: Changes in households' loans through transactions
Sources: NBH, MFB
-80
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Consumer confidence Economic prospect Business sentiment
Chart 2: Sentiment indicators and economic prospects in Hungary
Sources: GKI (GKI Economic Research Co.), MFB
-5%
0%
5%
10%
15%
-5%
0%
5%
10%
15%
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Net wages* Net real wages*
Sources: HCSO, MFB* excluding family tax benefits
Chart 4: Wages in the Hungarian economy without fostered workers(y/y, 3-month rolling average)
-400-300-200-1000100200300400
-400-300-200-100
0100200300400
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HU
F bi
llion
HU
F bi
llion
Domestic quoted shares Domestic investment fund sharesDomestic debt securities* Domestic bank depositCash (foreign currency) Cash (HUF denominated)Total financial assets
Chart 5: Households' financial assets(by transactions)
Sources: NBH, MFB
*government and other securities
-10%-8%-6%-4%-2%0%2%4%6%8%10%
-10%-8%-6%-4%-2%0%2%4%6%8%
10%
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Non-food products Foods Fuels
Chart 3: Retail trade by the main product groups (y/y)(volume index adjusted for calendar effects)
Sources: HCSO, MFB
-10,0%
-7,5%
-5,0%
-2,5%
0,0%
2,5%
5,0%
-10,0
-7,5
-5,0
-2,5
0,0
2,5
5,0
Q1
2008
Q3
2008
Q1
2009
Q3
2009
Q1
2010
Q3
2010
Q1
2011
Q3
2011
Q1
2012
Q3
2012
Q1
2013
Q3
2013
Q1
2014
perc
enta
ge p
oint
Social transfers in kind from NPISHs (LHS)Social transfers in kind from government (LHS)Household final consumption expenditure (LHS)GDP growth (RHS)
Chart 1: Households' actual consumption's contributionto GDP growth (y/y)
Sources: HCSO, MFB
Periscope
Periscope September 20148
Labour marketUnemployment rate in Hungary below 8.0% • Between May and July 2014, the rate of unemployment dropped to 7.9%, which is 2.2 percentage points lower than one
year before (Chart 1). In the second quarter there was a slowdown in the improvement of labour market conditions, despite accelerating growth in economic activity (Chart 2). The reason for this trend is that the sudden improvement in employment figures at the end of last year and in early 2014 was due primarily to the launch of the Winter public works programme. The end of this programme is noticeable in April to June figures (Charts 3–4), and the growth in market jobs was insufficient to counterbalance it. In the second half of the year, with the slowdown in the external environment, there is a risk that job creation in the manufacturing industry (one of the drivers of improvement in employment in the previous period) might stall.
• The slowdown in the improvement of the labour market situation is also noticeable in the number of new market jobs announced: in July, the number of new unsubsidised jobs registered (15.5 thousand) bottomed at a six-month low (Chart 5).
• The rise in gross wages in the first half of the year was the fastest in education. In the budgetary sector, wage dynamics were hampered by the considerable number of public workers (without them, the growth rate was 8.1%) (Chart 6).
-8%
-6%
-4%
-2%
0%
2%
4%
-300
-200
-100
0
100
200
300
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2014
thou
sand
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sons
Change in the number of employed people* (y/y, LHS)Change in the number of employees** (y/y, LHS)GDP growth (y/y, RHS)
Chart 2: Changes in the number of employed people and employees, and GDP growth in Hungary
Sources: HCSO, MFB
* community labour statistics by HCSO
** institutional labour statistics by HCSO
6%7%8%9%10%11%12%13%14%15%
-150-100
-500
50100150200250300
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Changes in number of unemployed persons (LHS)Changes in number of employed persons (LHS)Unemployment rate (RHS)
Sources: HCSO, MFB
* employed people andregistered job-seekers together
Chart 1: Changes in economically active population*and the unemployment rate
-75
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50
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100
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75
100
Agr
icul
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Man
ufac
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ng
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uf. o
ffo
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cts
Man
uf. o
f m
etal
s
Man
uf. o
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ters
Man
uf. o
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ansp
ort
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t
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n
Who
le s
ale
and
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il tr
ade
Tran
spor
t, s
tora
ge
Acc
omm
odat
ion
,fo
od s
ervi
ce
Fina
ncia
l ser
vice
s
Pub
licad
min
istr
atio
n
Educ
atio
n, h
ealt
h,
soci
al w
ork
thou
sand
per
sons
thou
sand
per
sons
Q2 2014 / Q2 2013 Balance* (RHS)
Chart 3: Number of employed persons by certain industries
Sources: HCSO, MFB
* compared to Q2 2008
-75%
-50%
-25%
0%
25%
50%
75%
100%
0
25
50
75
100
125
150
175
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thou
sand
Registered new vacancies (LHS) Not supported new vacancies (y/y, RHS)
Chart 5: Total registered new vacanciesand not supported vacancies
Sources: National Employment Service, MFB
103.2%103.5%102.8%
90.8%100.1%100.1%100.4%100.7%
101.2%101.5%101.9%102.6%
105.2%105.3%106.0%
109.9%112.1%
90% 95% 100% 105% 110% 115%
TotalBudgetary institutions
Business sectorReal estate activities
AgricultureFinancial intermediation
Health careConstruction
Wholesale and retail tradePublic administration
EducationIndustry
Accommodation, food service act.Transportation, storage
ICTSocial work activities
Administrative & support service act.
Chart 4: Changes in number of employed persons(April - June, , same period of the previous year = 100%)
Sources: HCSO, MFB
102.8%101.3%104.1%
92.1%100.0%100.4%
102.1%102.6%
103.0%103.1%104.0%104.2%104.3%104.4%
106.3%109.4%
120.6%
87,5% 100,0% 112,5% 125,0%
TotalBudgetary institutions
Business sectorSocial work activitiesPublic administrationReal estate activities
ICTTransportation, storage
ConstructionWholesale and retail trade
IndustryFinancial intermediation
AgricultureAccommodation, food service act.
Health careAdministrative and support service act.
Education
Chart 6: Changes in gross wages*(January - June 2014, same period of the previous year = 100%)
Sources: HCSO, MFB
* gross earnings without premiums and one month bonuses
Periscope
Periscope September 20149
InflationCrude oil prices on the global market continue to plummet in August• The average daily global market price of one barrel of Brent crude fell from USD 106.9 in July to USD 101.6 in August (-5.0%)
(Chart 1). This is a continuing indication that the price of ‘black gold’ is shaped by fears of slowing economic activity rather than by geopolitical risks. The annual rate of consumer price increase was 2.3% in China and 2.0% in the US in July 2014 (Chart 2). Concerns over deflation remain significant in the eurozone: the annual rate of inflation stood at 0.4% in July and, according to preliminary data, at only 0.3% in August.
• After three consecutive months of decrease, the Hungarian 12-month CPI once again began to grow (+0.1%) in July 2014, while compared to June it rose by 0.2%. Core inflation has steadily remained between 2.5-3.0% since February, meaning that Hungary has not been at a risk of deflation so far. With the elimination of household energy price cuts from the basis, the in-dex is expected to rise from the end of the year. This effect could be diminished by the fact that Russian import restrictions could lead to oversupply on the markets of certain foodstuffs, and that electricity prices have been decreased by 5.7% in September (Charts 3–5).
• Underlying inflationary trends continue to indicate moderate price dynamics in the Hungarian economy (Chart 6).
0%
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Demand sensitive* inflationCore inflation excluding indirect taxesSticky price inflation
Chart 6: Underlying inflation indicators (y/y)
Sources: CBH, MFB
*excluding changes in processed food prices from core inflation
adjusted for tax changes
-2,5%
0,0%
2,5%
5,0%
7,5%
10,0%
-2,5%
0,0%
2,5%
5,0%
7,5%
10,0%
01.2
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013
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07.2
013
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013
01.2
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04.2
014
USA Eurozone China
Chart 2: Consumer price index (y/y) in the USA, the eurozone, and China
Sources: Reuters, MFB
85
90
95
100
105
110
115
120
350
375
400
425
450
475
500
525
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$/ba
rrel
CRB commodity price index (LHS) CRB foodstuff price index (LHS)Brent Crude Oil (RHS)
Chart 1: Commodity price indices and world crude oil price
Sources: Reuters, MFB
-2%-1%0%1%2%3%4%5%6%7%
-2%-1%0%1%2%3%4%5%6%7%
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Foods Industrial productsMarket services Market energyAlcohol, tobacco FuelRegulated goods & services CPI
Chart 4: CPI by the main groups of goods and services
Sources: NBH, MFB
-2%
0%
2%
4%
6%
8%
-2%
0%
2%
4%
6%
8%
01.2
008
04.2
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04.2
014
07.2
014
Constant tax rate index Consumer price index Core inflation
Chart 3: Impact of changes in tax rates on consumer prices (y/y)
Sources: CBH, MFB
0.2%
-2.4%
-0.6%
-0.1%
0.0%
0.0%
0.7%
0.9%
-3,0% -2,0% -1,0% 0,0% 1,0%
Total
Clothing and footwear
Food
Alcoholic beverages, tobacco
Consumer durable goods
Fuel and power
Other goods, including motor fuels
Services
Chart 6: Monthly changes of consumer prices by the main groups of products and services
0.4%Chart 5: Monthly changes of consumer prices by the main groups of
products and services (July 2014)
Sources: HCSO, MFB
Periscope
Periscope September 201410
Banking sectorPlanned elimination of retail foreign-currency loans already showing its effect in banking indicators• Credit institutions operating as joint-stock companies began to enter the estimated HUF 900 billion burden represented by the
forint conversion of foreign-currency loans in their balance sheets, recording a total of HUF -401.8 billion in impairments and provision in the second quarter (Chart 1). In the same period, financial institutions recorded a loss after tax of HUF -363.8 billion after a profit of HUF 68.4 billion between January and March (Chart 2).
• With a 12.6% shrinkage in own funds, the capital adequacy ratio of credit institutions fell from 19.2% in March to 16.9% in June, which corresponded to the mid-year regional average (Chart 3).
• The Q1 growth in total assets (HUF +92.7 billion) was followed by a HUF 356.6 billion decrease between April and June (Chart 4). Although with the exception of a 0.1 percentage point increase in the corporate segment, the proportion of non-performing loans decreased in all client groups in Q2 (Chart 5), and there has also been no significant change in the loan-to-deposit ratio this year (Chart 6), activity in the banking sector can pick up more slowly than expected due to foreseeable losses in the future associated with foreign-currency loans.
-400
-300
-200
-100
0
100
200
300
Q1
2007
Q2
2007
Q3
2007
Q4
2007
Q1
2008
Q2
2008
Q3
2008
Q4
2008
Q1
2009
Q2
2009
Q3
2009
Q4
2009
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
HU
F bi
llion
2. ábra: Részvénytársasági hitelintézetek*4 negyedéves adózott eredménye
Sources: CBH, MFBChart 2: After-tax profit of Hungarian credit institutions(quarterly data)*
* without MFB, EXIM, KELER
Sources: CBH, MFB
12%
13%
14%
15%
16%
17%
18%
19%
20%
12%
13%
14%
15%
16%
17%
18%
19%
20%
12.2
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03.2
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06.2
014
Hungary Poland Czech Republic Slovakia Romania
Chart 3: Capital adequacy ratio of the banking sectorin some Central Eastern European countries
Sources: CBH, KNF, CNB, NBS, BNRO, MFB
7 246.1
6 716.9
6 514.3
6 530.0
5 982.6
5 734.5
5 741.6
20 230.3
18 873.0
19 080.1
19 121.8
16 240.2
15 394.3
15 467.9
29 177.9
28 996.4
28 125.3
28 797.3
26 300.7
25 528.2
25 264.3
0 5 000 10 000 15 000 20 000 25 000 30 000
31.12.2008
31.12.2009
31.12.2010
31.12.2011
31.12.2012
31.12.2013
30.06.2014
Total assets Total loans Total loans to non-financial enterprisesSources: CBH, MFB HUF billion
Chart 4: Balance sheet total and total loans of Hungarian credit institutions*
* without MFB, EXIM, KELER
0%2%4%6%8%10%12%14%16%18%20%
0%2%4%6%8%
10%12%14%16%18%20%
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014
Total loans Corporate loansHousehold loans Loans of local governments
Chart 5: Proportion of non-perfoming loans*
* total amount of loans overdue over 90-days / total loans
Sources: CBH, MFB
0%
25%
50%
75%
100%
125%
150%
175%
200%
225%
250%
0%
25%
50%
75%
100%
125%
150%
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200%
225%
250%
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014
Corporate sector
Household sector
Total
Chart 6: Loan-to-deposit ratio (LTD ratio) of credit institutions*(December 2003 - June 2014)
Sources: CBH, MFB
* without MFB, EXIM, KELER
-450-400-350-300-250-200-150-100
-500
50100150
Q1
2007
Q2
2007
Q3
2007
Q4
2007
Q1
2008
Q2
2008
Q3
2008
Q4
2008
Q1
2009
Q2
2009
Q3
2009
Q4
2009
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
billi
on H
UF
Chart 1: Change in impairments and specific provisions*
Sources: CBH, MFB
* Hungarian credit institutions without MFB, EXIM, KELER
Periscope
Periscope September 201411
Corporate fundingDemand for HUF loans boosted by the increasingly favourable prices of the credits• In July, the loan portfolio of the corporate sector shrank by HUF 82.1 billion, while as a result of transactions, corporate loans
experienced a HUF 35.4 billion contraction, comprising a HUF 3.8 billion rise in forint loans and a HUF 38.8 billion decrease in foreign currency loans (Charts 1–2).
• Companies have been borrowing more forint-denominated loans than they repay for six months now, which is likely due in part to the second phase of the Funding for Growth Scheme and based on the lending surveys of the Central Bank of Hunga-ry the financial sector is expecting a further increase in demand for forint loans (Chart 3). Nevertheless, the loan portfolio of Hungarian companies continues to shrink at a rate higher than the regional average on an annual level (Chart 4).
• In line with the central bank’s monetary easing cycle, interest rates on forint denominated loans bottomed at a new historic low in July: the average interest rate on 1–5-year forint loans fell to 4.72%, and that on loans with longer maturities to 4.64%, meaning that the latter has been lower than the interest rates on loans with similar conditions in Poland (4.72%) for two consecutive months now (Charts 5–6).
0%
2%
4%
6%
8%
10%
12%
14%
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BUBOR
EURIBOR
HUF loans -over 5 years
HUF loans - 1-5years
EUR loans inHungary - over5 yearsEUR loans inHungary - 1-5years
Chart 5: Interbank interest rates*, andinterest rates on corporate loans**
** annualised interest rates weighted by month-end values* 3-month interbank rates
Sources: ECB, CBH, MFB
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
Q1
2009
Q2
2009
Q3
2009
Q4
2009
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
HUF loans FX loans
* net change indicator, positive: increase Sources: CBH lending surveys, MFB
Chart 3: Demand for corporate loans in the next 6 monthsby currency according to the credit institutions' view*
-250-200-150-100-50050100150200250300350400
-250-200-150-100
-500
50100150200250300350400
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HU
F bi
llion
HU
F bi
llion
HUF loansLoans denominated in foreign currenciesTotal loans
Chart 2: Change in total amount of outstandingnon-financial corporate loans through loan transactions
Sources: CBH, MFB
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
0
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HU
F bi
llion
HU
F bi
llion
Non-financial corporations Other financial corporationsHouseholds Local governments
Chart 1: Total amount of loans by counterparties
Sources: CBH, MFB
0%
2%
4%
6%
8%
10%
12%
14%
16%
0%
2%
4%
6%
8%
10%
12%
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16%
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Hungary
CzechRepublic
Poland
Slovakia
Romania
Bulgaria
Chart 6: Interest rates on corporate loans* in Central and Eastern European countries
Sources: ECB, CBH, MFB
* annualised interest rates over 5 year maturity, weighted by month-end values, in national currency
-15%
-10%
-5%
0%
5%
10%
15%
20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
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Czech Republic Poland Romania Slovakia Hungary
Chart 4: Change in total amount ofoutstanding non-financial corporate loans (y/y)*
Sources: ECB, MFB
* change in total value converted to euro
Periscope
Periscope September 201412
Exchange ratesForint exchange rate against key foreign currencies at over two-year levels in August• Exceeding the 315 HUF/EUR threshold several times in August, the forint has weakened to a level not seen since early 2012
against the euro, and hit more than two-year lows against the Swiss franc and the US dollar as well. In August 2014 the fo-rint lost 0.7% in value against the common European currency, and depreciated at a rate of 1.6% and 2.1% against the franc and the dollar, respectively (month-end exchange rates: 315.0 HUF/EUR, 261.2 HUF/CHF and 238.9 HUF/USD). In the same period, the Polish zloty and the Czech koruna lost 1.2% and 0.6%, respectively, against the euro, while the Romanian leu recorded an 0.5% appreciation (Charts 1–2).
• Although at a global level, risk appetites were picking up in the previous month, the escalation of the Ukrainian crisis put additional seller’s pressure on Eastern European currencies (Chart 3). Among Hungarian country-specific factors, the ones promoting a depreciation were the further decrease of the yield spreads of Hungarian bonds (Chart 4), the alignment of market interest rate expectations to the central bank’s indications (Chart 5), and expected losses in the banking sector. The decreasing country risk premium and real economic actors’ expectations — moderately worsening since June, but still generally optimistic — could only slow down the weakening of the Hungarian currency (Chart 6).
40
50
60
70
80
90
100
110
120
130230
240
250
260
270
280
290
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310
320
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999
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inve
rted
sca
le
HUF/EUR (monthly average, LHS)
ESI (RHS)
Chart 6: The HUF/EUR exchange rate and theEconomic Sentiment Index (ESI) in Hungary
Sources: ECB, European Commission, MFB
improving sentiment
2,00%2,50%3,00%3,50%4,00%4,50%5,00%5,50%6,00%6,50%7,00%7,50%
265270275280285290295300305310315320
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04.2
015
HUF/EUR (LHS)Central Bank's base rate (RHS)Interest rate expectations on 29th August 2014 (RHS)Interest rate expectations on 31th July 2014 (RHS)Interest rate expectations on 30th June 2014 (RHS)
Chart 5: The HUF/EUR exchange rate, the Central Bank's base rate and market based expectations about the base rate in the future*
* based on BUBOR fixings and 1x4,3x6, 6x9, 9x12forward rate agreements (FRAs)
Sources: ECB, CBH, MFB
1002003004005006007008009001 000
240250260270280290300310320330
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basi
s po
ints
HUF/EUR (LHS)3-month bill yield spread between Hungarian and German treasury bills (RHS)12-month bill yield spread between Hungarian and German treasury bills (RHS)
Chart 4: The HUF/EUR exchange rate,3 and 12-month bill yield spread
Sources: Government Debt Management Agency, Reuters, MFB
5
10
15
20
25
30
295
300
305
310
315
320
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poin
t
HUF/EUR (LHS) VIX index (RHS)
Chart 3: The HUF/EUR exchange rate and the global risk appetite
Sources: CBOE, ECB, MFBincreasing global risk appetite
99,0%
99,5%
100,0%
100,5%
101,0%
101,5%
102,0%
99,0%
99,5%
100,0%
100,5%
101,0%
101,5%
102,0%
31.0
7.20
14
07.0
8.20
14
14.0
8.20
14
21.0
8.20
14
28.0
8.20
14
Czech koruna Hungarian forint Romanian leu Polish zloty
Sources: ECB, MFB
* 31.07.2014 = 100%
Chart 2: The exchange rates of Central and Eastern European currencies against the euro
strengthening against the euro
210215220225230235240245250255260265
275280285290295300305310315320325330
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HUF/EUR (LHS) HUF/USD (RHS) HUF/CHF (RHS)
Chart 1: The exchange rate of the forint against theSwiss franc, the US dollar and the euro
Sources: ECB, MFB
Periscope
Periscope September 201413
General government and its financingBudget revenue growth overtaking expenditure growth in the second half of the year• With a record-low August deficit of HUF 7.4 billion, the deficit of the central subsystem in the first eight months of 2014
amounted to HUF 858.8 billion, 87.2% of the annual target, while the central budget balance (HUF -1 053.1 billion) exceeded the annual target by 9.5%. The latter, however, is HUF 177.6 billion lower than one year previously (Chart 1).Detailed figures indicate that between January and July, revenues grew by HUF 610.4 billion and expenditure by HUF 548.2 billion compared to last year. The latter was due largely (89.6%) to increased spending by budgetary authorities. Consumption taxes and payments by the population and enterprises exceeded last year’s figures both on a time basis and in terms of volume (Table 1), due generally to a faster than expected economic and employment growth, and the deployment of online cash registers.
• Yields on government securities on the secondary market fell by 13–28 basis points, and discount treasury bonds yields bottomed at a new historic low. In August the 10-year yields melted from 4.73% to 4.45%; within the region, Poland was the only country that recorded an even steeper monthly drop (-29 bp). Despite declining yields, government securities continue to gain in popularity in the financial institutions sector, among foreign investors and the population as well — as of August, the former is also promoted by the conversion of two-week central bank bonds to deposits (Charts 2–4).
Table 1: The revenues of the central government and the social security funds by main groups
HUF billion 2013 2014
total income (esti-
mation)
January -
July
% of yearly reve-nues
yearly revenue target
January -
July
% of yearly
revenuetarget
CENTRAL GOVERNMENT 10967.8 5376.6 49.0% 10697.3 5987.0 56.0%
Taxes imposedon corporations 1152.1 510.2 44.3% 1351.7 640.5 47.4%
Corporate income tax 322.5 116.2 36.0% 358.8 159.4 44.4%
Taxes imposed on SMEs 148.5 73.6 49.6% 190.4 78.4 41.2%
Special taxes on banks and branches 148.9 81.8 54.9% 144.0 73.4 51.0%
Taxes imposedon consumption 4055.3 2147.7 53.0% 4316.7 2351.9 54.5%
Value added tax 2809.6 1526.2 54.3% 3014.1 1627.8 54.0%
Excise tax 897.3 491.2 54.7% 931.9 502.2 53.9%
Taxes imposedon households 1654.4 962.9 58.2% 1700.1 1022.2 60.1%
Personal income tax 1504.6 879.0 58.4% 1550.0 929.3 60.0%
Pension Fund 3015.2 1781.9 59.1% 2964.6 1816.7 61.3%
Health Care Fund 1847.8 1088.2 58.9% 1884.2 1130.8 60.0%
Sources: Ministry for National Economy, HCSO, MFB
0500
1 0001 5002 0002 5003 0003 5004 0004 5005 0005 500
12.2
004
06.2
005
12.2
005
06.2
006
12.2
006
06.2
007
12.2
007
06.2
008
12.2
008
06.2
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12.2
009
06.2
010
12.2
010
06.2
011
12.2
011
06.2
012
12.2
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06.2
013
12.2
013
06.2
014
HU
F bi
llion
National Bank ofHungaryBanks and specialisedlending institutionsHouseholds
Foreign holders
Insurance companiesand pension fundsInvestment funds
Government
Corporations
Chart 4: The ownership structure of the Hungarian government securities (December 2004 - June 2014)
Sources: Government Debt Management Agency, MFB
1,0%1,5%2,0%2,5%3,0%3,5%4,0%4,5%5,0%5,5%6,0%6,5%
1,0%1,5%2,0%2,5%3,0%3,5%4,0%4,5%5,0%5,5%6,0%6,5%
01.2
014
02.2
014
03.2
014
04.2
014
05.2
014
06.2
014
07.2
014
08.2
014
3-month 6-month 12-month 5-year 10-year CBH base rate
Chart 2: Reference yields on Hungarian government securites
Sources: Government Debt Management Agency, CBH, MFB
5
10
15
20
25
30
35
1%
2%
3%
4%
5%
6%
7%
01.2
014
02.2
014
03.2
014
04.2
014
05.2
014
06.2
014
07.2
014
08.2
014
poin
t
Hungary Czech Republic Poland Romania VIX index (RHS)
Chart 3: Yields on 10-year government bonds
Sources: Government Debt Management Agency, Reuters, MFB
increasing global risk appetite
-542.1 -534.7 -518.7 -1 040.9 -597.4 -731.6 -796.2
-683.7 -745.9 -701.1-703.3
-756.1-715.6 -765.6
-1 357.0 -1 317.0 -1 498..3-1 119.6
-1 067.0 -1 086.3 -1 076.2
-2 132.5 -2 339.3 -2 459.9 -2 685.7-2 739.9
-3 486.1-3 977.1-404.1 -379.7 -374.5
-364.4-483.4
-450.3-403.1
606.4 860.7 1 025.3 1 100.5 1 305.2 1 555.3 1 650.91 247.8
1 202.2 1 096.4 843.5 919.6 962.9 1 022.21 785.6 1 684.3 1 781.1 1 856.7
2 168.92 147.7
2 351.9545.5 529.8 388.9 610.3536.1 510.2
640.5
-677.4 -703.2 -1 012.9 -1 367.5 -542.5 -1 093.3 -1 031.1
-8 000-7 000-6 000-5 000-4 000-3 000-2 000-1 000
01 0002 0003 0004 0005 0006 000
2008 2009 2010 2011 2012 2013 2014
Payment of economicorganizationsTaxes in consumption
Payment of households
Central budgetary institutions
Other revenues
Family benefits, socialsubsidiesPayments of central budgetaryinstitutionsTransfers to generalgovernment subsystemsDebt service
Other expenditures
Balance of central budget
value of balance
Chart 1: Revenues and expenditures of central budgetin January - July period (billion HUF)
Sources: Ministry for National Economy, HCSO, MFB
