The report was prepared on the order of the Ministry of Agriculture and Rural Development in June 2009. We presented the expected changes in the room of manoeuvring of the Hungarian economy until 2013 with the help of a general macroeconomic forecast. We made an overview on the relevant domestic and international literature, and conducted an empirical survey in order to identify the views and the expectations of the largest actors in the agricultural sector.
The report was prepared on the order of the Ministry of Agriculture and Rural Development in June 2009.
In the report we presented the expected changes in the room of manoeuvring of the Hungarian economy until 2013 with the help of a general macroeconomic forecast. We made an overview on the relevant domestic and international literature, and conducted an empirical survey in order to identify the views and the expectations of the largest actors in the agricultural sector. We contacted by phone 300 firms in agriculture and food industry that represent adequately the structure of the industry surveyed. The main findings of the study are as follows:
The world is currently in a deep financial, real economic and value crisis. Accurate forecast on future trends is impossible. On the other hand it can be stated that the first phase of the world economic crisis must have com to an end. The steep and linear fall of production and consumption, which was equally typical for all developed countries has stopped. Global agricultural production presumably attains the previous level more quickly than the other sectors (only because it fell less).
As far as Hungary's agricultural sector is concerned, Hungarian general government deficit will be reduced in 2009-2010, and the reliance on external financial sources will be constrained. The effects of the tight fiscal policy will have a negative impact on the volume of agricultural subsidies.
Quick and radical changes are not probable in the EU budget until 2013. Nevertheless, transformation is likely to take place in the budget of the Community in the period ranging from 2014 to 2020 with certain implications on the preceding period. It can be forecast with a high probability that until 2020 the budget of EU will be restructured in a policy driven way, so expenditures will be ordered to common policy goals. The EU's common policy objectives (economically) will be determined in the individual areas by the amount of "European added value". Although only small changes are likely in the present financial structures until 2013, but the EU will be pressed to introduce essential modifications after 2013.
The state of undertakings involved in our survey is rather diverse. Typically the big share of the debt is with firms that do not have substantial savings, whereas those companies have accumulated savings, which do not have significant stocks of loans. A more "market like" policy could lead to a considerable concentration of firms.
Thanks partly to government subsidies, partly to special credit lines, major agricultural firms might have survived the most critical phase of the credit crisis. Markets are differentiated and the answers of the firms to the survey reflect considerable uncertainty. This is a limiting factor of reliable projections until 2013.
According to the responses, more than two thirds of agricultural firms and the majority of firms in the food industry pursue the strategy of keeping and defending the present level of output. The biggest problem for agricultural firms is the shortage of funds and credits. According to the undertakings, in the next years illegal or black employment will decrease from today's high level significantly in the food industry and slightly in agriculture. Nevertheless, some growth in "grey employment" is expected in the next few years in both sectors. Profitability was affected most negatively by black and grey employment effects, followed by the fall of production efficiency and the worsening of labor supply.
Respondents think that Hungarian bio-energy product will be less competitive than now in the next few years. The development of the bio-energy sector exerts an upward pressure on fodder prices. Its secondary effect will be the provision of markets for non-food agricultural produce.
71% of the agricultural firms surveyed think that GMO plants will not affect their competitiveness significantly. Firms in the food industry expect the improvement of their competitiveness as a consequence of the ban of GMO plants.