PRLog (Press Release)– Mar 22, 2011– The Hungarian economy will experience a recovery in 2011, but it will not be plain sailing. BMI continues to see two big structural problems that will limit economic growth and therefore affect prospects for the freight transport sector. They are a large budget deficit, which will require ongoing fiscal austerity, and high levels of household debt, which will dampen consumer demand. A weak forint means that exports will make a positive contribution to GDP, but this will be somewhat offset by lower demand from neighbouring Germany, corsa where growth in 2011 will cool off.
On the political front auto part , while the centre-right ruling party Fidesz and Prime Minister Viktor Orban have solid electoral support, the government's moves to consolidate its hold on power have been controversial and have increased political risk. A new media law has been criticised as contrary to EU guidelines; there have also been a set of increases in corporate tax rates which could be negative for the investment climate. BMI forecasts 2011 GDP growth of 2.3% in Hungary (after 0.8% the previous year). Our outlook for 2012 is for growth to accelerate marginally to 2.6%. In the five years to 2015 we expect growth to average 2.7% per annum, implying that Hungary's peformance will remain muted among its Eastern European peers..
Headline Industry Data
* Helped in part by a weaker national currency, the forint, Hungary's trade (imports + exports) will pick up by 7.1% in 2011, faster than the estimated 5.6% registered in 2010. This year's growth will get the total value of trade back up to where it was before the recession of 2009. * The fastest rate of volume growth this year will be achieved by the airfreight industry, which will show growth of 6.0% to 59,720 tonnes. Second place will be shared by railfreight, with a gain of 5.2% to 45.729mn tonnes, and road haulage, also +5.2% to 245.688mn tonnes. As the figures show, road freight remains the dominant mode. * Bottom of the growth table will be taken by inland waterway freight, up by 2.5% (barely above predicted GDP expansion) to 8.311mn tonnes.
Key Industry Trends
The freight transport sector is on the government's investment agenda, but BMI wonders over the depth of the Budapest administration's commitment to the industry. The 'New Szechenyi Plan', launched in mid- January makes the right noises about boosting Hungary's overall investment rate, and notes that EUR7.25bn (US$9.71bn) in EU funds are available for development projects running up to 2013. But while transport is mentioned as one of the investment priorities, the focus seems to be more on passenger transport than on freight, with an eye on the development of tourism. With an ongoing ne chevrolet ed for fiscal restraint, it is therefore hard to see large-scale public investment in the freight transport sector over the next few years.
Developing the freight transport potential of the Danube and related waterways is back on the agenda. Hungary has said it will use its six-month presidency of the EU in the first half of this year to push for the development of the Danube as an important freight corridor, used by six EU members (the others are Germany, Austria, Slovakia, Romania, and Bulgaria). Freight volume shipped annually through the Danube is estimated at only 50mn tonnes, compared to 300mn tonnes shipped through the Rhine, so the potential for greater utilisation is clear. Studies suggest that the cost of Danube transport is around EUR10 per thousand tonne-km, compared with EUR35 per thousand tonne-km for road transport.
Government assistance for Malev is being questioned. Having rescued financially troubled national airline Malev, which was renationalised last year, the government is now being scrutinised by the European Commission, which believes its rules on competition and state-aid may have been violated. The government is still hoping to find a private sector buyer for the airline.
Key Risks To Outlook
BMI believes the main risk to our Hungarian freight forecasts is on the downside, and is associated with political risk. The government is treading a fine line between relying on the private sector to invest and develop new freight business, on the one hand, and increasing the tax burden on corporations on the other, in an attempt to raise revenue as a way of tackling its fiscal difficulties. We see a number of scenarios in which this balancing act could go wrong, leading freight operators in eastern Europe to ch acura oose to avoid Hungary and locate their hub operations elsewhere.
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