But when we consider that government spending can be down, domestic demand can be down, construction can be steady to down and exporst can come under very heavy pressure from the external slowdown, it is hard to see where Hungary is going to get GDP growth from this year. There seem to be no counter-cyclical measures available here at all.
and just today, as if to echo my worst fears we get the news that in November 2007 Hungary's construction output plummeted 22.7% year on year, according to both unadjusted data and figures adjusted for working days, according to the Central Statistics Office (KSH) this morning. This compared with a 20.1% and 21.0% yr/yr decline in the previous month, according to the equivalent data. That is to say that the situation got worse in November. We also know that industrial output slowed in November, so my advice is watch out for the Q4 2007 GDP data.
There was a 2.2% fall from October, according to data adjusted seasonally and by working days (ie this is not attributable to seasonal factors), following a 2.9% m/m seasonally adjusted growth in October. In the first 11 months of 2007 construction output was down by 12.8%. The stock of new orders at the end of November was down by 32.6% year on year, so don't expect any early improvement here, since if this is any indicator the first half of 2008 can be significantly worse than the first half of 2007. Also of note is the fact that in the civil engineering sector the stock of orders was down by 54.3% year on year, against a year on year drop of 51.9% a month earlier. As I said yesterday, fiscal tightening means the government cannot react to try and offset the huge drop in demand. With monetary policy also effectively at a standstill Hungary is entering recession with no counter cyclical remedies whatsoever available. Very difficult is what I would say.
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