The Economic Development Index (EDI) calculated by thePolicy Agenda for the 3^rd quarter of 2013 was 0.95 –so the slight optimism (1.11) noticed in the previous quarter has gone – and now each partial-indicator of this index shows again the same less-favourable situation observed at the beginning of the year. Compared to the previous quarter of the year the situation as regards monetary processes is assessable more pessimistically, and there are not any signs suggesting even the slightest change to the positive in the management of households either. Neither permanent improvement nor a rapid evolution of the business management is expectable.

Economic development is not perceptible

Unlike the slight optimism observed in the second quarter of 2013, the EDI shows again a stagnating economy. Although it is clear that the performance of Hungarian economy might as well improve in the aggregate at the end of the fifth year of the recession, this development is still uncertain.

Economic Development Index (2010-2013)

The intense growth anticipated for the next year is hindered by the fact that accumulation of reserves did not occur earlier to the necessary extent. State-owned infrastructural development projects will bring a slight increase, but really productive investments have yet to be made. Emergence is also impeded by the fiscal performance – in respect of the state budget deficit –and the difficulties to achieve the targeted 3% deficit may also represent another jeopardy, which is also indicated by the fact that the strong reduction of public debts also remained a plan only. After a massive drop back of the GDP in 2012, the slow-down in industrial production, the disturbances in employment, and the decline in consumption the index still fails to indicate any powerful development for the next year, now, in the 3^rd quarter of 2013, but merely some increase deriving from a low base effect.

Traps of the monetary and fiscal status

The fiscal indices of EDI, due to changes in economic situation, such as the forceful push down of the deficit retarding economic growth, the constant and rapid cutting of the base interest rate by the National Bank of Hungary (MNB), the excessive taxes levied on financial processes and the banking system, all denote difficulties. Less VAT payment than budgeted, and in principal, the significant drop back or even lack of capital investments, the unambiguously accelerated profit withdrawals all indicate further loss of trust.

The bank credit portfolio of the corporate sector has been shrinking in every quarter ever since 2009. Stern conditions still impede the credit lending processes in the corporate and household segments.

In the second quarter of 2013 – as a result of the MNB’s program – as regards short-term loans a growth by some billion forints started. However, the more favourable interest rates help only few enterprises. The Growth Credit Program of the central bank will somewhat relieve limits in credit supply in the SME sector, the positive impact of which is expectable to be felt already in the third quarter of the year.

Households are facing more difficulties

Mismanagement processes, and the measures increasing the burdens imposed on inhabitants during the past three years have pushed the households gradually in a more and more difficult situation. According to the current level of the EDI figures, however, not any further slump is expectable, and perhaps, the households would be incapable of making any further restrictions in their management, since the majority of the households strive actually to survive. In respect of employment and as regards the earnings in 2013 stagnation was observed, while as of 2014 perhaps some improvement is expectable and even consumption may increase a bit.

Unfavourable is the situation since the financial status of households still not improves, and the portfolio of retail savings keeps growing narrower. Although the constraint of borrowing grows, to get bank loans credit solvency will not be of an acceptable level even if the necessary sources are in hand. As regards real wages improvement is not notable, and the slight growth is merely brought by the trends in consumer prices.

No signs of secure improvement in ventures

None of the indices of financial management in the sector of enterprises improve to a comforting extent in spite of the fact that the indices of trust has become somewhat better. Although with certain ups and downs, the trust of German businesses has grown slightly and the trust index of Hungarian SMEs has also improved a bit as of the third quarter. However, the environment is still unfavourable, that is industrial production is unable to improve; the direct capital investments have dropped back completely, moreover profit withdrawal has grown significantly, and there are still not investments in production. Peculiarly enough, as of the beginning of 2013, the net foreign non-banking financing started to grow compared to the previous years, still only very few companies are able to use these sources, thus it does not mitigate the credit limits of the economy. The enterprising sector still expects the government to fulfil its promises to develop the corporate loan lending significantly and through this they hope to have more chances for a growth.