GKI: Hungary economy will slow down even in best case
The economy will definitely shrink as a result of the coronavirus pandemic according to GKI, with only the magnitude remaining to be seen. The main question now is whether the restrictions on the movements of people caused by the virus will affect only the second or third quarters, or even a longer period, GKI said.
Global forecasts, including JP Morgan, project a severe slowdown in the second quarter followed by a rebound in the second half of the year.
GKI's less pessimistic scenario projects 3% year-on-year GDP growth as the economy stabilises in the second half of the year. However, option B expects that the downturn will slow down to around 6% in the second half of the year.
The scenarios are naturally based on highly uncertain assumptions, and more adverse processes may come to pass, GKI adds.
GKI also surveyed the current and expected effects of the coronavirus pandemic in a separate study commissioned by the Confederation of Hungarian Employers and Industrialists (MGYOSZ), which found that 7% of respondents were feeling substantial effects and another 20% experienced slight effects.
Logic dictates that the impacts become more perceivable the bigger a business is, as bigger players typically have more extensive business relations and thus a higher probability of encountering problems. As a result, only 22% of micro businesses, those with less than 11 employees, reported experiencing any kind of adverse effect due to the pandemic, while nearly half of businesses employing more than 250 have been hit already. As for individual industries, construction has been less affected, with only 1% reporting adverse effects. At the other end of the scale, the tourism and entertainment industries were hit hardest and reported the bleakest outlook.
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