Abstract
Hungarian industrial production data for November showed the fourth
consecutive month of contraction,
with output falling by a whopping 12.2%
(10.1% when adjusted for calendar effects) year-on-year (y-oy).
This is
yet another leading indicator of the Hungarian economy' s rapid deterioration.
On the back of
this release, and given BMI' s downgrade of our 2009
Eurozone GDP growth forecast to -1.6%, we have
revised down our Hungarian
2009 growth forecast. We now anticipate a deep recession, with GDP
growth
of -3.4% replacing our previous moderate recession forecast of -0.8%.
Moreover, we expect
growth to remain weighed down beyond 2009, and
forecast GDP growth of only 0.1% in 2010, down
from the 2.6% that we
previously anticipated.
A key factor negatively impacting the Hungarian
economy in 2009 will be the recession in all key
external trading
partners. Germany entered technical recession in Q308, and we believe that the
entire
Eurozone will follow suit in 2009. Moreover, we expect the UK
economy to shrink by 3.5% in 2009 and
Russia to contract as well in H109.
This in turn will severely impact demand for Hungarian exports,
which we
expect to contract by 4.5% in 2009, from a previous expectation of 0.5%
growth.
The industrial production data already reflects the effects of the
external slowdown. Hungarian industry is
heavily geared towards
manufacturing export goods, and the weakness of demand in the Eurozone is
forcing such firms to rein in production. We forecast industrial output growth
to average -5.0% over
2009, which will be indicative of the weakness of
export demand.
Moreover, while we had previously forecast export growth to
recover reasonably robustly beyond 2009 –
to 7.3% in 2010 – we
now see the global recession lasting throughout the next two years. This is
likely to
hinder Hungarian exporters throughout 2010, and have slashed our
export growth forecast to 1.0%
accordingly.
Since the last quarter, we
have made two major changes to the data in this report. First, we have –
to the
greatest extent possible – incorporated hard figures that
have been made available by the regulator(s) and
trade association(s) in
each country. In some cases, therefore, we have begun to include numbers
that
pertain to the development of the insurance sector through the early
stages of the global financial crisis.
Second, we have extended our
forecasts out to 2013. In all cases, we have reviewed the key growth
drivers – non-life penetration and life density – incorporated in
our forecasts.
The global financial crisis is likely to affect the various
segments of the global insurance industry in
different ways. In many
countries, especially in Europe, the coming recession points to softness in
the
non-life segment. In many cases, numbers of policies may fall and
there should be downwards pressure
on premiums. By contrast, the main
problem for the life segment in almost every country is the extreme
volatility of financial markets. Over the longer term however, the fortunes of
life insurance will likely
recover thanks to the secular growth of
organised savings in most countries. China – where the larger
insurance companies continue to achieve double digit growth in premium income
- is a good example of
this. Some particular niches should also do well in
the current environment, such as legal liability
insurance.
In Central
and Eastern Europe, we profile 22 multi-national insurance companies. In
alphabetical order,
these are AEGON, AIG, Allianz, Aviva, AXA, Cardif,
ERGO, Eureko, Fortis, Generali, GRAWE,
Groupama, HDI-Gerling, HSBC
Insurance, ING, MetLife, Prudential Financial, QBE, RSA,
UNIQA, Vienna
Insurance Group and Zurich Financial Services.
We also discuss the
regional presence of Belgium’s KBC and Austria’s Erste Bank
through a number of
insurance subsidiaries and explain the importance, for
each of the various countries, of purely domestic
firms.
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