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Monday, August 27, 2007

Hungary Population Trends 2007

The Hungarian Statistical Office have just issued the latest edition of Hungary vital events:

In the first six months of 2007 there were fewer live births and more deaths compared to the same period of the previous year. Remarkably fewer couples got married than one year before. According to the preliminary data 46 718 children were born, 67 138 inhabitants died and 16 830 couples got married. The degree of natural decrease was higher than in January–June 2006. The population size of the country was estimated to be 10 055 thousands at the end of the period.

In fact in the same period of 2006 there were 48,149 births and 66,411 deaths, which just shows that it is a mistake here to judge the numbers year by year.

If we look at the figures since the early 1990s the trend is clear.

First off life expectancy. As we can see this has been rising steadily. This is of course very good news, but it is one of the factors which is deeply implicated in the process of population ageing in Hungary, and this ageing is now occuring rapidly. Rising life expectancy also implies, especially since a significant part of the increase is being achieved by extending the outlook for the over 60s, that this is quite expensive, and needs financing, and this is just one more reason why there will be permanent pressure on the health component of the government budget from now on. In fact I commented on some of these issues in this post which I wrote following the death of Ferenc Puskas.

Hungary's median age which is currently 38.9, is now set to rise systematically and rapidly.Now if we turn to births and deaths, well what can I say, the situation is a serious one, since mortality has now long been above natality, and this situation is now structural and deeply embedded. Really quite drastic measures are now needed to do something to reverse this trend. One of these would be pro-natality policies (but these cost money, and money is one of the things which the Hungarian government hasn't exactly got a lot of right now). Anoth would be inward migration, but migrants need - and are attracted by - jobs. And again, given the looming recession which seems to face Hungary, job creation isn't going to be one of Hungary's specialties in the short term. So a difficult situation all round I think. What I would say is that once Hungary pulls out of recession addressing this problem really ought to become the number one national priority.

Finally, and just to confirm the general picture I am presenting, here is the fertility chart for Hungary since 1970. As can be seen, the pattern in Hungary is rather different from many other East European societies in that the fertility decline is long standing, and not consequent on the fall of the Berlin Wall. Indeed Hungary has now been below replacement fertility for nearly thirty years now. A quite remarkable situations, all things considered, and not a happy one. Not at all.


Rikk03 said...

The sooner Hungary gets their public finances in order the better, followed by competitive tax cuts. Hungary needs growth!

Im beginning to wonder if after the current government gets through with the austerity measures, a government change wouldnt be bad thing, since they are promoting big tax cuts to fuel the economy through growth.

Edward Hugh said...


Thanks for all the comments.

I just don't see things this way, but then again I am only a macro economist risking my point of view and my reputation. You are going to risk your money. I have to respect that.

But you have to ask yourself where the growth is going to come from.

Basically there are only 3 components: private domestic demand, exports and government demand.

You are ruling out the third one (and who am I to disagree, since they will have little revenue growth to spend, although ageing related liabilities will be mounting rapidly).

(Incidentally, I am discounting private investment for the moment since that is a dependent variable, and needs the expectation of demand growth elsewhere to justify the outlay).

So if we look at domestic demand, this is likely from now on to be on a one way ticket down, following other elderly societies like Japan, Germany and Italy.

So Germany needs to live - like Germany and Japan do (not like the much younger and more vibrant Ireland, the US, the Uk, Australia etc) - through exports.

But to get the exports you need to get competitiveness, which means undoing all the ill effects of the recent inflation, which means dropping the forint considerably I think.

But this is where we hit the private debt issue.

The only real solution I can see here is a big haircut for all of those in the banking sector - mainly Austrians I think - whop have lent money. This will be a generally politically negotiated settlement, like in another country whose name I think I dare not mention at this point. Basically the value of all these foreign currency mortgages needs to be cut in half, and this will need to be done across the whole of eastern Europe, so when it happens this is going to be big.

Just watch the headlines. I don't think you will miss this one. My guess is that the issue will really get started in Poland, since Hungary and the Baltics are just too small to make a big global correction.

OK, just my views for what they are worth. It's your money, as I say. Caveat Emptor, and all that, but be careful. I wouldn't be doing what you are thinking of doing, I can tell you that.

Look at median ages and housing booms. All the ones who get real booms have median ages between 35 and 40. Hungary is going off into a lengthy political dispute/economic recession. By the time she comes out she will be too old to have a big housing boom. Centre of Budapest upper end property might be interesting, but hadn't you better wait and see how things settle down in Tokyo and Berlin before jumping to any conclusions.

My guess is we are about to see a "correction" in those markets, some of the big investors have already been pulling the plug. The thing is to do that kind of operation you need to know when to get in and when to get out.

None of this is either my area of expertise or interest I'm afraid. I'm interested in ideas more than money, so I doubt I would make a very good capitalist.

I'm typically British in a way I suppose, if you look at our history of inventions and practical business projects. We are obviously a lot better at the former than we are at the latter.

Edward Hugh said...

Oh yes. I forgot.

Try looking at Portugal post 2000. They have also had to make the kind of adjustment Hungary is now having.

This may be a best case scenario of what comes next in Hungary. Several years of sub par growth. But the whole point about the demographic stuff in this post is that this adjustment comes at a cricial moment in Hungary's demographic history. There was a small window of opportunity, unfortunately I think it is all going to be blown.

Rikk03 said...

Budapest is a fantastic city with huge potential - despite the population issues. I see it as a big holiday destination for Europeans - including the British (im from UK also).

Its location within Europe is second to none, and it has a vibrant banking sector.

I understand your fears, however I am positive of the future short term growth prospects - after 2009. International businesses like Hungary - just the way it is, partially due to the low wages but also due to the standard of education and the fact that they are so forward looking with regards to the Euro reforms.

Which of the new EU accession countries do you think has the best macro economic outlook?

Rikk03 said...

It is and will be a major distribution centre of EU, - a prime spot for warehousing and a logistics dream location. With all the new road improvements underway and those planned for the next few years AND at the same time limiting traffic into the centre of Budapest (they predict a 40% reduction of traffic through centre).

Politically speaking - everyone loves hungary, Germans, Chinese, Americans - everyone I can think of as of writing this. There will always be some ill feeling toward the Russians I fear (in terms of the people) but politically they are on good terms.

Have you visited all of these countries that you analyse?

Edward Hugh said...

"Which of the new EU accession countries do you think has the best macro economic outlook?"

The Czech Republic, maybe Slovenia. I wouldn't go much farther than that at this point. The population problems are so dramatic. I see a lot of instability coming. Maybe quite soon, like significant corrections in Romania and Poland. Hard to say at this precise moment. Watch the emerging market risk premium, and the zloty and the Leu.

Edward Hugh said...

"Politically speaking - everyone loves hungary"

This isn't the point. I'm sure this is the case. I have a very soft spot for Hungary, always have, ever since I watched the 1956 uprising as a child on the telly. But I am only reading macro economic data, and telling you what I see.

How I personally "feel" about things doesn't enter, although - as I say - I wouldn't be running this blog if I wasn't concerned, and anxious to try and do something useful.

Edward Hugh said...

Look,Rikk, I think what I am trying to say is that people lead their hearts rule their heads to much when it comes to economic analysis, people don't have enough emotional intelligence.

I have a blog on Italy. I run it because I love Italy, and am pretty concerned about what I see happening their. If I stress the fact that Italy is in danger of defaulting on its government debt, this isn't because I want this to happen, but precisely because I don't want it to happen, and for it not to happen people need to change how they perceive the whole underlying situation, which is mainly to do with rapid population ageing, and the low economic growth and high fiscal liability that all this brings.

This week the value of the Turkish Lira went down, apparently because the wife of the new president wears a headscarfe.

Now you can think whatever you want about Islam, I really don't care either way, but I really don't see why what kind of scarfe a president's wife wears has to do with induatrial output and retail sales numbers, which is what I think economists should be focused on.

As I say, people tend to think with their hearts, and this is a big mistake.

Antal Dániel said...


I think the wider analysis of KSH is not available in English, altough I'll try to get some of it here. The latest data are puzzling even for the workers of KSH: the recent birth and mortality rates started to be very different in the regions of Hungary. This may not be very interesting for an analyst from a big country such as the US or even Germany, but Hungary is a quite small country with a fairly homogeneous population - or so we thought.

One aspect seems to drive these forces - but it cannot be proven yet - that the Roma population and its different lifestyle is getting significant on a national level. (Two or three years ago one third of the children starting elementary school in Hungary belong to this ethnic minority). The first guess is not that the Roma fundamentally alter our demographics: it seems that the lower fertility and lower mortality follows the majority of the population with a sizeable gap.

I wonder if you have any examples of minorities have different demographics from the majority. Many people say the France is an example but they do not collect such data.

Antal Dániel said...

Anyone who reads Hungarian can find out a little bit more in this Népszabadság article: Gyorsul a népesség fogyása.

Unfortunately this is a newspaper article without data tables. It is not very cleverly written.

Anyhow, there are three interesting factors quoted from prof. Hablicsek: the higher fertility of the Roma people, increasing mobility within Hungary, and a net gain in international migration.

Increasing domestic mobility is something that has long been expected but never quite happened. The ongoing net gain in the international migration is somewhat surpising given that Hungary has the lowest growth rate in the region. Maybe it has to do with the very low mobility of Hungarians (less outbound migration) and relatively high living standard despite the low growth opportunities (more inbound migration).

One thing that is a historic trend: Central Hungary has been a net gainer in population throughout the last hundred years. It has a specific historic reason: Hungary lost many urban centers when the historic Hungarian Kingdom was dissolved after the World War I. This made Budapest almost the sole center of urban growth. There are some signs that the EU accession may change this: the old urban center which are now in Romania and Slovakia are easily accessible even for intra-day commuters.