* Hungarian/Czech Sept trade surpluses bigger than fcast
* Sharp fall in imports continues, on weak demand
* Hungary data consistent with small improvement in output
(Combines Hungarian/Czech trade data)
By Krisztina Than
BUDAPEST, Nov 6 (Reuters) - Hungarian and Czech imports
continued to fall in September due to weak domestic demand and
low investment, while a recovery in exports remained modest,
signalling only limited prospects for a near-term recovery.
Hungary and nearby Czech Republic, both small, open and
export-driven economies with a heavy exposure to western
European markets, are struggling with a painful recession this
year as demand for their manufactured goods collapsed and
domestic consumption has been subdued.
The Czech Republic posted a trade surplus of 17.76 billion
crown ($1.01 billion) in September, the biggest in this month on
record, as exports dropped by an annual 13.9 percent, and
imports fell by 18 percent in crown terms. []
"The (Czech) foreign trade data looks good as it shows a
record surplus. But this is due to the drop in imports, which
signals a weak domestic demand both in investment and consumer
sectors," said David Marek, chief economist at Patria Finance.
"This means nothing particularly good for the upcoming
months; it is possible that the recovery will be slower than
expected."
Hungary had a trade surplus of 485.6 million euros in
September <HUTRD=ECI> based on preliminary data, above analysts'
forecast for 320 million in a Reuters survey <HUEURO1>.
Hungarian imports fell by 23.6 percent year on year in euro
terms, steeper than exports, which were down by 17.6 percent.
However, Czech exports fell faster in September than in
August which analysts said may be due to the fact that a German
car scrap subsidy ended and could hit orders in the Czech car
industry, with the effect likely becoming more palpable in
October.
The Czech central bank's new economic forecasts released on
Thursday, the same day the bank kept its main rate <CZCBIR=ECI>
on hold at 1.25 percent, showed the bank reduced its forecast
for this year's GDP and now sees a contraction of 4.4 percent.
The bank raised the 2010 growth forecast to 1.4 percent from
0.7 percent, but said that growth would weaken in the course of
the year due to high unemployment and weaker foreign demand.
Hungary's economy is expected to shrink at a steeper rate
than most other regional economies, shrinking 6.7 percent this
year and a further fall of 0.9 percent is expected in 2010.
Economic growth is not expected to return before the second
half of next year.
"These (Hungarian trade) data are consistent with industrial
production and show that there was a marginal improvement in the
real economy as of September but nothing fundamental," said
Zsolt Kondrat, an economist at MKB Bank.
"As for the future, we expect a slow pick-up in the industry
on a quarterly basis and as a consequence the annual fall in
production, imports and exports will moderate substantially."
Data on Thursday showed that Hungary's industrial output
fell by less than expected in September and some key sectors
showed signs of improvement, signalling that a modest recovery
may be under way. []
REDUCING VULNERABILITY
"The slowing decline in (Hungarian) exports reflects the
gradual recovery observed (and also expected) in the Western
European manufacturing cycle, while weak domestic demand
continues to suppress the import side," said Gyorgy Barta at CIB
in Budapest.
"The large surpluses should, nonetheless, be thought of as a
merely `cosmetic' improvement, as the overall turnover of
foreign trade still remains measly."
While a marked improvement in the trade balance is a
side-effect of a painful recession, it improves the external
balance which is positive especially for vulnerable countries
such as Hungary which has high debts and heavily relies on
foreign financing.
Hungary, the first EU country to resort to IMF and EU
financial help last year when the global crisis hit, is
gradually weaning itself off foreign aid but its public debt
seen at around 80 percent of GDP is still very high.
"On the bright side, the improvement in the trade balance
over the last year also improves our current account balance,"
Barta said.
Hungary had a current account surplus of 476 million euros
in the second quarter, its first quarterly surplus in 14 years
and its 2009 full-year deficit is projected at 2.1 billion euros
<HUCUR1>, way below previous years' levels.
(Reporting by Krisztina Than; Editing by Toby Chopra)
