Facebook Blogging

Edward Hugh has a lively and enjoyable Facebook community where he publishes frequent breaking news economics links and short updates. If you would like to receive these updates on a regular basis and join the debate please invite Edward as a friend by clicking the Facebook link at the top of the right sidebar.

Tuesday, October 02, 2007

Hungary Monthly Trade Gap

Hungary revised its initial estimate of the July trade gap down yesterday (by 20 million euros) to 145 million euros (or 37149 million HUF) according to the Hungarian statistics office. Exports grew by 5,587.9 million euros or were up 23.1% yr/yr in July as compared with a 17.9% expansion in June.

Imports were up 16.8% or 5,733.3 million euros as compared with a 16.0% increase in June.

The rate of growth in Hungarian exports has been exceeding that of imports for some two years now, so the 12 month trailing trade deficit is coming down steadily. It totalled “only" 1.4 billion euro in July, but this was less than half of the total for the same period last year. Exports to the European Union increased by 17.9% while imports from this source rose 15.7% year on year in the first seven months of 2007.

Source: KSH External trade, Detailed results, January-July 2007


Antal Dániel said...

The latest data show a similar pattern: the Jan - Aug estimage is -211 million euro, which is 138 million euro better than in 2006. On a Aug/Aug basis export is up by 18% and import is up by 14% in euros.

Article in Hungarian

Edward Hugh said...

Hi Daniel,

I think there is no doubt about the improvement, and the contrast between what is happening in Hungary and whay is going on in the Baltics couldn't be clearer at this point - see my latest thing on Estonia on Baltic Economy Watch.

The big issue is the CA deficit, and how this is being especially fuelled by dividends on equities, which have grown very significantly of late.

This mean that the entire Hungarian population is effectively having to work very very hard to generate a small surplus in trade and goods which they becomes dwarfed by an income outflow which is generated itself by all that work.

Something here doesn't add up. I don't know how much these people paid for their initial ownership of parts of Hungary, but it seems to me there is an issue here.

Basically with FDI it is very important to distinguish greenfield site investment which brings in new technology and creates newer, more modern jobs, and the buying up of the old state monopolies, which obviously need to be privatised, but it is important for the longer run that the terms and conditions are right. ie, not just any old price.

Unfortunately I don't know enough about Hungary's recent history to say anything useful on this. But I can see an issue in the data, and it isn't a small one.

In the shorter term, if the eurozone is going to recession - and watch in particular what is now happening to Spain, although the data will be a couple of months feeding through - then this won't help short term Hungarian exports any.

Antal Dániel said...

I think you see the problem very clearly. I am the rail regulator in Hungary and we are just going to privatize a part of our former state rail monopolist. Your argument is very much valid I think.

However, I think you cannot do too much about it. Central Europe has a huge wealth problem: it always had very small per capita capital stocks compared to Western Europe. Privatization helped in the short-run, because made loss making ill-managed state-owned companies work again, thus giving the population income. However, the wealth problem was not solved: the new owners obviously made investments in order to make profit.

Personal incomes are flows and are much more easier to move up than capital stock. Central Europeans earned less than Western Europeans for centuries. Even if wages will converge in a few decades it takes at least a century for capital stocks to be comparable.

Ironically what makes some convergence possible is that European, especially Western Europeans have destroyed the majority of their inherited capital stocks in the World Wars. Since they had much more to loose, they have lost much more in those wars and Central Europe has only fifty years of very low income to make up.

Another interesting point: at the start of the transition Central Europe had abundant labor supplies and very little capital, so wages were relatively low and capital gains were very high. Foreign capitalists and those few who grabbed capital stocks in the early years made fortunes. Now there seems to be a sort of overshooting: in many countries labor is relatively more scarce than capital and wages are rising.

But if you think about the good old production function, these are just relative measures. We still have fewer labor and fewer capital than Western Europe.