Books on Hungary
% of GDP
Update No: 101 - (27/09/05)
Last August, Socialist prime minister Peter
Medgyessy tendered his resignation after a cabinet dispute. The Socialists chose
businessman and sports minister Ferenc Gyurcsany as the new head of government.
He is facing parliamentary elections in 2006, probably in April.
The campaign has already started, with the two main party leaders having a
debate recently on TV. The opposition Citizens Party (Fidesz) has extended its
lead in Hungary's political scene, according to a poll by Gallup. 34 per cent of
respondents would vote for Fidesz-led by former prime minister Viktor Orban-in
the next general election.
The ruling Hungarian Socialist Party (MSZP) is second with 23 per cent, followed
by the Alliance of Free Democrats (SZDSZ) with two per cent and the Hungarian
Democratic Forum (MDF) also with two per cent. Support for FIDESZ increased by
three points in a month, while backing for the MSZP fell by two points.
Budapest to calm investors after re-nationalisation fears
The Hungarian government is discussing the privatization of several
state-administered industries with 26 foreign companies. Gyurcsany has said the
proposal could create more than 23,000 new jobs. Opposition lawmakers have urged
for a slower process.
Speaking to reporters on August 27th, Orban pledged to review all the
privatization deals proposed by the current administration if he is able to form
a government next year. Two days later, Gyurcsany dismissed the opposition
politician's remarks, calling them "a few badly phrased sentences."
Gyurcsany has launched a review of investor confidence after Orban's remarks.
Orban had said his party would scrutinise every deal for corruption, adding that
the centre-right Fidesz would also consider reclaiming assets it felt should be
under state control. Orban expanded upon his threat recently, telling Kossuth
Radio that the government "wanted to sell everything that isn't chained
The Fidesz leader specifically mentioned the privatisation of Budapest Airport
Rt - the company that runs Budapest's international airport - as a major
concern. "The airport is hugely profitable and cannot be neglected for
safety reasons. Selling this is a mistake," he said.
The State Privatisation Agency (APV) recently announced a shortlist of 5 bidders
for the company. APV received a maximum bid of 1.59bn Euro (US$1.95bn) for the
asset, and expects the final price to be higher.
Britain's BAA PLC, Germany's Fraport AG and Australia's Macquarie are amongst
the short-listed bidders. The Socialist government spokeswoman, Boglar Laszlo,
said that Gyuercsany had ordered the finance and economic ministers to consult
with investors to check that they weren't nervous after Orban's remarks, adding
that several foreign companies had already expressed concern.
The Hungarian government is consulting with 26 potential foreign investors,
which could create a total of 23,000 new jobs and bring in an investment of
around 16m Euro (US$19.5m), Laszlo repeated, (Ferenc Gyurcsany's words).
Japanese car industry firms Bridgestone and Suzuki, and German software
developer SAP AG are among the companies considering investment in the new
European Union member.
Eurozone date under threat
Hungary will enhance its appeal to investors if it joins the Euro within the
next five years, official government policy.
But it has overshot its year-end public deficit target for 2005 because of
adjustments in its criticised accounting practices, EU Economic and Monetary
Affairs Commissioner Joaquin Almunia said. Almunia said that the European
statistics agency, Eurostat, will overrule a decision by Budapest to exclude an
expensive public-private partnership deal for motorway construction from the
He said that this would lead to a larger deficit than the 3.6 per cent of gross
domestic product targeted for the whole of 2005.
"Eurostat's opinion is that this expenditure cannot be excluded of the
public accounts, so it will have an impact on the public deficit," Almunia
told a news conference.
Although analysts have cast doubt on Hungary's ability to adopt the euro by 2010
because of persistently high deficits, Almunia said he had been given a
commitment by Gyurcsany that the country would cut the deficit sufficiently to
meet the eurozone target date.
Five companies to compete for Budapest airport privatisation
Hungarian authorities recently announced a short list of five firms bidding for
control of Budapest Airport Rt, the state-owned company which operates
Budapest's Ferihegy airport and is currently being privatised, New Europe
The Hungarian State Privatisation Agency (APV) however also announced that they
are calling off the privatisation of state airline Malev due to the absence of
any suitable bids. Out of nine original bidders for the airport operators, APV
short-listed the UK's BAA International Holdings, Germany's Hochtief and Fraport-Deutsche
Bank, Australia's Macquarie and Denmark's Copenhagen Airports. "Asset
management will be granted to the winner for 75 years," Marton Vagi, APV's
chief executive, said at a press conference. "All upgrades to the
facilities will have to be completed by 2015," he added. The privatisation
will be the largest in Hungary in 2005. The bids ranged in value from 823
million Euro to 1.59 billion Euro, APV said.
Construction output up 24.8% year-on-year in June
Construction industry output rose 24.8 per cent year-on-year in volume terms in
June, according to both working-day adjusted figures and unadjusted figures, the
Central Statistics Office (KSH) announced on August 19.
Construction output rose a seasonally - and working-day - adjusted 7.5 per cent
from May. In the first half of the current year, construction industry output
rose 13.8 per cent year-on-year. Growth was again driven by motorway
constructions, the KSH noted.
MOL doubles profit in Q2
Hungary's MOL Rt, the largest oil company in the 10 newest European Union
countries, more than doubled its profit in the second quarter as demand for oil
products widened refining margins, the Budapest Business Journal reported.
Net income was HUF 62.9 billion, or HUF 610 a share, compared with HUF 29.2
billion, or HUF 282 a share in the year-earlier period, MOL said in a statement.
FOOD & DRINK
Brau Union unit profits up 76%
Brewery Brau Union Hungaria had unconsolidated pre-tax profit of HUF 688 million
in the first half of 2005, 76.1 per cent more than in the same period a year
earlier, the company said in its unaudited H1 report, the Budapest Business
Journal reported on August 15.
The rise in profits is partly the result of a low base. The report noted that
pre-tax profits were HUF 391 million in the first half of 2004, 83 per cent less
than in the same period of 2003, even as revenues rose 17.4 per cent. Brau Union
Hungaria had revenue of HUF 18.9 billion, down 3.3 per cent year-on-year. In
volume terms, Brau Union Hungaria's sales fell 4.1 per cent to 960,000
hectolitres, giving it a 30.7 per cent share of the market, still a fraction
more than a year earlier.
Hungary records 14% jump in H1 tourism revenues
Tourism revenues at commercial accommodations in Hungary were up 13.5 percent to
HUF 94.2 billion (USD 476 million) in the first half of 2005, Interfax News
Agency reported, citing data released by the Central Statistical Office (KSH).
In June alone, revenue growth slowed to 6.2 per cent, down from growth rates of
14-15 per cent in previous months. Tourism revenues at commercial accommodations
totalled HUF 20.6 billion in June alone.
First-half data indicate that the number of foreign arrivals rose 8.8 per cent
on the year to 6.578 million. The KSH noted that only 30 per cent of these
stayed at least one night in Hungary, with most of the remainder entering the
country for purposes of transit or shopping. Total guest nights were up 3.4 per
cent in the first six months to 7.8 million. In June alone, while the number of
domestic guest nights rose 3.1 per cent, foreign guest nights fell by 3.9 per
cent, for an aggregate monthly decrease of 0.8 per cent. Foreign guest nights
were up 4.3 per cent to 4.403 million during the first six months. The increase
in foreign guest nights was led by apartment hotels, up 60 per cent in the first
half, while the relatively smaller categories of youth hostels and wellness
hotels also showed above-average growth. At the same time, significant declines
were registered in guest nights spent in bungalows and campsites.
Guest nights spent by tourists from the EU, which account for more than two
thirds of total guest nights, rose 5.3 per cent on the year to 3.3 million in
January-June. Tourist numbers were up significantly from Bulgaria, Poland, the
United Kingdom, Ireland, Japan, and China, the report said.
Domestic guest nights were up 2.3 per cent to 3.4 million in the first half.
Domestic demand for four-and five-star hotels and wellness hotels was up
significantly, more than doubling in the latter case, while the number of
domestic guest nights spent in lower category hotels, tourist hotels and youth
hostels declined, by 10-20 percent in most cases. A regional breakdown of data
showed that guest nights were up 11 per cent in central Hungary, but grew in the
low single digits or stagnated in most other regions, with a decline of 7 per
cent in the northern Plains region.
8 bidders in Budapest metro tender
Budapest City Council has chosen eight companies to submit bids in a
multi-million Euro tender to supply carriages for the Budapest metro system, the
city announced on August 18, New Europe reported.
Chinese firm China South Locomotive and Rolling Stock Industry, Koreas Hanwha
Corporation and Germanys Siemens AG are among the companies bidding to provide
22 standard carriages for the existing Metro 2 line and 15 driverless multiple
units for the new Metro 4 line, which is under construction.
A further option to provide an additional seven carriages for the new line will
be written into the contract.
BKVs DBR Metro Project Directorate - the company responsible for constructing
the new metro line - will shortlist five bidders for the second round. The
contract for the carriages will be signed by the second quarter of 2006 at the
latest and the first carriages will be due in 2009 for the opening of the new
line, DBR said in a press release. According to Laszlo Gulyas, DBR project
manager, the tender will be worth around 100 million Euro.