Hungarian Industrial Sector Under Pressure
Resource from: CBCC Likes:2933
May 19,2009
Hungary has gradually assumed an important sourcing role across the world bearing industry. However, the country still suffers from a weak economic infrastructure, heavy borrowing, and an industrial sector dependent upon exporting its output to now-suffering markets.
Industrial output in Hungary fell at an alarming 23% annualized rate in January 2009, then 25% in February, and 20% in March. First quarter GDP showed its biggest drop on record.
While the government had expected a recession to hit, its speed and depth has been exacerbated far beyond forecasts by the Hungarian manufacturing economy's growing dependence upon its position as a low-cost producer, exporting to countries now hard-hit by the global recession.
While some analysts had expected even sharper drops in industrial output, there has been increasing concern among manufacturers who have shifted production to Hungarian facilities for cost reasons in recent years. The declining value of the Forint to the dollar has also hurt manufacturers located in the U.S. or other dollar-tied countries.
Among other non-financial challenges are that Hungarian workers have been prone to strike when wage and cost-of-living packages are not to their expectations. In some key infrastructure areas such as rail, strikes are even more common.
Adding to Hungary's export market problems is a central banking system which finds itself increasingly hard-pressed to shoulder the costs of protecting against debt default. What had been a strong industrial trade surplus early in 2008 suddenly because a strong industrial trade deficit toward the end of the year.
Vehicle production, which accounts for nearly 20% of the country's industrial economy, was down 31% in February and 30% in March. Manufacturing orders plummeted 35% in February, but the decline slowed to 15% in March.
Looking forward, the Hungarian Central Statistics Office said best estimates put 2009's year-on-year decline in industrial production easing to 15% from 2008.
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