HUNGARY

Dunapack Ltd

General economic situation of the country - 2000

The Hungarian economy performed well in 2000. The economic growth can be considered as high, even in international comparison, but its rate was continuously slackening in the course of the year.

In 2000, GDP increased by approximately 5 percent.

The export-oriented increase of the industry continued to play the decisive role in the dynamic growth of the economy. Despite the moderation in the last months, the yearly growth of the industrial output reached almost 20 percent. Besides the exports, the gradual upward tendency of domestic sales also contributed to the growth of the industrial production.

The current account deficit amounted to EUR 1.92 billion, versus EUR 1.97 billion of 1999. The deficit of 2000 makes approximately 4.5 percent of GDP. This figure resulted from a disadvantageous trade balance of goods and services and a favourable tourist balance. The shares of multinational companies (their investments and profit repatriation) leave increasingly a mark on the current account. A new factor has to be calculated in this field, namely the investments of the Hungarian companies in other (mostly in neighbouring) countries.

The intensive economic growth enabled a moderation of the unemployment rate, which was 6 percent in 2000.

Mainly due to external factors (high oil price, unfavourable currency rates), the consumer prices increased more than expected and reached almost 10 percent.

Performance of the paper industry

As the paper import and export data are still preliminary, the paper consumption can only be estimated. Apparently, it increased by 12 percent and developed as follows:

	1997	1998	1999	2000	2000/1999
	(thousand tonnes)				(%)
Consumption	595	654	642	720a	112
Production	410	434	456	506	111
Export	161	170	213	216a	101
Import	346	390	399	430a	108

^a estimate

The breakdown of the paper production by grades and the changes are shown in the following table:

	1997	1998	1999	2000	2000/1999
	(thousand tonnes)				(%)
Total paper and board	410	434	456	506	111
Newsprint	-	-	-	-	-
Coated printing and writing paper	-	-	-	-	-
Uncoated printing and writing paper	169	184	202	208	103
Household and sanitary	34	34	35	35	100
Linerboard	30	32	43	52	121
Fluting medium	110	128	125	154	123
Kraft wrapping and packaging	34	35	33	33	100
Folding boxboard	-	-	-	-	-
Other paper and board	33	21	18	24	133

Paper production exceeded the performance of the Hungarian economy and increased by 11 percent. This was enabled mainly by the investments carried out at Dunapack Ltd in 1999, when an extensive rebuild of a paper machine was completed.

Smaller investments are completed at the Hungarian site of Neusiedler, which result in a continuous capacity increase of uncoated printing and writing paper.

Füzfö Paper Mill went into bankruptcy in the course of the year and stopped its production for an uncertain period. This means a capacity falling of approximately 40 000 tonnes/year.

Straw pulp production reached a volume of 24 000 tonnes (an increase of 43 percent) in 2000 due to favourable world market circumstances.

Forest industry

The development of the Hungarian forests in the last years can be summed up as follows:

It can be stated that both the forested area and the growing stock are slowly but continuously growing. The increase in forested area results from self-regeneration and afforestation. The health condition of forest lands is improving. However, biotic and abiotic damages are still significant. The competency of forest management is of reasonable standard in Hungary.

The breakdown of the forested land by ownership is as below:

Owner Share

State 58.6%
Public (municipal, etc.) 0.6%
Private 40.8%

Breakdown of forest land area by use:

Timber production 76.7%
Protection 18.7%
Public welfare 2.4%
Other 2.2%

These proportions have slightly changed to the advantage of the protective forests during the last years (15.4 percent - 18.7 percent). Parallel with a slight decrease of the share of productive forests there was an increase in forests for other purposes which can be related to the designation of seed producing stands, forest reservations and their shelter zones.

As to the removals, only 79 percent of the sustainable forest plan potential were removed in this year. The state-owned forest companies used their felling possibilities at 91 percent on the average, while private and public forest companies at 64 percent only. The unregulated ownership situation and the delay in designation of the lands continue to be a restrictive factor. The backlog in this respect is diminishing, however, not dynamically enough. The increased need for nature conservancy puts further limits to timber harvesting.

Tendencies in the wood processing industry have been contrary - to some extent - to what characterized the macro economy. There was a small decrease in domestic sales with a great variety in the individual sub-branch.

The production volumes and their changes are shown in the table below:

Vision

An ambitious programme for building homes was presented by the government recently. This gives new perspectives to the construction industry and as a consequence, expectations to the wood-processing industry.

With the participation of the best experts of forest-based industry branches and scientific areas, a team was established lately to prepare a ten-year national forestry programme by the end of 2002.