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German Economic Downturn Hits Hungary: Export Plummets

In a startling revelation, Hungary's export volume plummeted by over 8 percent this past December, confirmed by the second estimate from the Hungarian Central Statistical Office (KSH).
The figures turned out to be even worse than the first estimate. Despite this decline, Hungary’s foreign trade turnover had a notably successful year overall, effectively recovering from the previous year's significant deficit.

According to the KSH's second estimate, the volume of exports decreased by 8.4 percent while imports saw a reduction of 0.8 percent in December, compared to the same period of the previous year. The trade deficit stood at 271 million euros, but the balance improved by 27 million euros compared to one year prior these figures illustrating an 83 million euro larger deficit than initially estimated.

Initially, the KSH reported a 20 percent decrease in export and a 7.6 percent decline in import volumes compared to the previous month. However, the updated report indicates that the seasonally and working-day adjusted export volume grew by 1.5 percent, while imports increased by 14 percent in November.

In euro terms, the value of exports also worsened, registering a 9.1 percent volume decrease instead of the 7.8 percent initially anticipated. This trade performance is closely linked to the ongoing troubles of the German economy, which has yet to stabilize. This has direct implications for Hungary, given that 25 percent of Hungarian exports are directly bound for Germany.

The KSH detailed that in terms of prices, the cost of machinery and transport equipment exports decreased by 13 percent, and imports by 7.5 percent in December 2022. The volume of electrical machinery, apparatus, and instruments shrank by more than one-tenth in exports, while imports slightly decreased.

The export volume of road vehicles modestly increased, while import volumes fell nearly by a tenth compared to the baseline period. Telecommunications technology, sound recording, and playback equipment export volumes shrank by more than one-tenth, while import volumes rose nearly by the same margin from the year prior. The performance in energy-generating machinery and equipment was down by one-sixth in exports and slightly in imports from December 2022. Within the machinery and transport equipment category, exports contributed to a 7.3 percent decline and imports to a 3.4 percent decline in the total trade volume.

Processed goods saw a 6.1 percent decline in export volume and a 5.6 percent reduction in imports. The decrease in volume on the export side was influenced by the professional and scientific monitoring instruments and devices, while on the import side, other processed goods were affected. Processed goods increased the observed volume decrease in total trade by 1.7 percentage points in exports and 1.9 percentage points in imports.

Energy carriers witnessed a substantial 26 percent increase in exports and a 57 percent surge in imports compared to the previous year. The growth in the export turnover is attributable to the significant rise in crude oil and petroleum products, and the import turnover to natural and synthetic gas volumes. The increase in energy carriers trade volume mitigated the decrease in total volume by 0.9 percentage points in exports and 7.0 points in imports.

In the category of food, beverages, and tobacco, export volume increased by 5.0 percent, while import volume decreased by 14 percent. The changes in volume were mainly driven by the trade in grains and grain preparations. This category mitigated the decline in the total export turnover by 0.4 percentage points and increased the pace of import reduction by 0.9 points.

SIGNIFICANT IMPROVEMENT IN FOREIGN TRADE BALANCE LAST YEAR

According to the KSH, exports in 2023 increased by 2.5 percent, whereas imports were reduced by 3.5 percent.

The balance of goods in foreign trade improved by 18.3 billion euros, with a surplus of 9.2 billion euros.

Measured in Hungarian forint, the price level of goods turnover decreased by 0.3 percent in exports and 6.6 percent in imports from the same period of the previous year. The terms of trade improved by 6.7 percent. The forint appreciated by 2.4 percent against the euro and 5.3 percent against the dollar.

The value of exports was 149.2 billion euros (57.0 trillion forints), and that of imports was 140.0 billion euros (53.5 trillion forints).
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