Quarterly Review 1986/4 [antikvár]

QUARTERL Y REVIEW 4/1986 Macroeconomic situation The third quarter of 1986 witnessed continued slow growth of domestic and policies output, combined with a further deterioration of the external balance of the Hungarian economy. Up to the end of September, the performance of both industry and agriculture, the two leading sectors of the economy, remained moderate and the overall growth rate of real gross production was in the range of 1-1.5 percent, on annual basis. A deficit of USD 1.3 billion, exceeding the USD 0.6 billion deficit in the same period of last year appeared on the current account of the country's international payments. The main factors leading to the unfavorable trends were the problems of placing Hungarian export goods on the international markets, a substantial loss in the international terms of trade and the animation of domestic demand (both consumption and investments). A significant part of the difficulties stemmed from adverse changes in the world economy. One of the exogeneous factors was the fall of oil prices, which drastically affected the development of Hungary's sizable chemical industry and caused a USD 80-100 million net loss in the convertible balance of payments. As the country traditionally exports high volumes of agricultural produce, the food sector continued to suffer from the depressed prices of its major export products (meat and grain). Food export was also hit by the consequences of the Chernobyl accident in a magnitude of USD 30-50 million (excluding indirect effects like changes in consumer preferences following the EEC ban on the imports of food from East European countries). In 1986, Hungary's export receipts were devalued as compared to import outlays by the sharp depreciation of the US dollar as the share of the dollar was dominant in export revenues but much less significant in import payments. The combination of all these external factors led to a more than 6 percent loss in non-rouble terms of trade and a total loss of USD 350-400 million on the convertible current account. While the international environment brought about disadvantageous changes, internal tendencies did not provide sufficient support for the improvement of the external balance either. Due to difficulties in exports and a severe drought affecting agriculture, the rate of growth fell short of the authorities' expectations, whereas there was a substantial expansion in the elements of domestic absorption. Within aggregate domestic demand, the approximately 3 percent increase in the real cash incomes of the population, which was reflected in a similar expansion of personal consumption expenditures represented a major difficulty. This overrun had its roots in an increased outflow of wages and salaries in the socialist sector and a rapid expansion of personal incomes earned in small ven-