Hungary Retail Report Q4 2012

The Hungary Retail Report examines the long-term potential of the local consumer market, but flags short-term concerns about the impact on Hungary's economic outlook of the government's constrictive policy and the lack of an IMF/EU external financing deal.

The report examines how best to maximise returns in the Hungarian retail market while minimising investment risk, and also explores the impact of the rapidly deteriorating situation in the eurozone on the Hungarian consumer and the ability of producers and exporters to realise returns in the short term. The report also analyses the growth and risk management strategies being employed by the leading players in the Hungarian retail sector, as they seek to maximise the growth opportunities offered by the local market.

Hungarian per capita consumer spending is forecast to increase by 37% to 2016, compared with a regional growth average of 44%. The country comes seventh out of 10 in BMI's Central and Eastern Europe Retail Risk/Reward Ratings, although it outperforms slightly for risk.

Among all retail categories, mass grocery retail (MGR) will be one of the strongest performers through to 2016 in growth terms, with sales forecast to reach US$12.72bn in 2012 and to grow faster than overall food sales throughout the forecast period, by almost 44%, to US$18.28bn by 2016. This would take MGR's share of the overall food market from 66% in 2012 to about 70% by the end of the forecast period. Convenience stores will benefit from changing consumer purchasing habits as time pressures take over, with their value forecast to grow by a local currency CAGR of 7.38% in the next five years.

In the competitive arena, BMI sees upside potential in the European Commission (EC)'s decision in March 2012 to give the green light to Auchan's acquisition of Magyar Hipermarket. The EC concluded that the merged company would continue to face strong competition from other market players, and that customers would still have sufficient alternative suppliers in all markets concerned. Over the last quarter, BMI has revised the following forecasts/views:

?? With growth turning sharply negative in the first quarter of 2012, BMI has revised down its fullyear growth forecast for 2012 to -1.2% from -0.5% previously. The rapidly deteriorating situation in the eurozone presents significant headwinds to the Hungarian economy given its heavy trade and investment linkages with Western Europe.

?? The Hungarian consumer is in no position to enjoy a recovery this year, with private demand expected to decline by 2.3% year-on-year (y-o-y) in real terms on the back of tighter credit conditions, rising unemployment, weakened confidence and constrictive fiscal policy. As a Hungary Retail Report Q4 2012 © Business Monitor International Ltd Page 6 component of real GDP by expenditure, private consumption will pose a 1.4 percentage point (pp) drag on headline growth.

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