BMI's Executive Summary

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The new Hungary Power Report from BMI forecasts that the country will account for 1.93% of Central and Eastern European (CEE) regional power generation by 2011, and to remain a net importer of electricity from neighbouring states. BMI's CEE power generation estimate for 2006 is 1,995 terawatt hours (twh), representing an increase of 3.39% over the previous year. We are forecasting an increase in regional generation to 2,398twh by 2011, representing a rise of 19.4%.

CEE thermal power generation in 2006 is estimated by BMI at 1,230twh, accounting for 61.6% of the total electricity supplied in the region. Our forecast for 2011 is 1,440twh, implying 17.1% growth that reduces the market share of thermal generation to 60% – in spite of environmental concerns that should be promoting renewables, hydro-electricity and nuclear generation. Hungary's thermal generation in 2006 is estimated at 22.6twh, or 1.84% of the regional total. By 2011, the country is expected to account for 1.97% of thermal generation.

For Hungary, gas is the dominant fuel, accounting for 48.6% of Primary Energy Demand (PED), followed by oil at 28.1%, nuclear energy at 12.4% and coal with a 10.8% share of PED Regional energy demand is forecast to reach 1,676mn tonnes of oil equivalent (mn toe) by 2011, representing 18.1% growth over the period. Hungary's estimated 2006 market share of 1.80% is set to fall to 1.75% by 2011. Hungary's estimated 14.4twh of nuclear demand last year is forecast to reach 17.5twh by 2011, with its share of the CEE nuclear market rising from 4.08% to 4.15% over the period.

Hungary's overall business environment can be considered attractive in a regional context, with moderate long-term economic risk, very low long-term political risk, and an advanced state of deregulation. It is let down only by modest forecast growth in power consumption and generating capacity, as well as a relatively high level of energy import dependence. In the BMI Business Environment Ranking matrix, Hungary receives a composite score of 33, which ranks the country equal second out of nine states included in the CEE region, alongside Kazakhstan.

BMI is forecasting Hungarian real GDP growth averaging 4.0% per annum between 2006 and 2011, although this year's forecast is just 2.4%. Population is expected to contract from 10.1mn to 10.0mn over the period, but GDP per capita and electricity consumption per capita are forecast to increase significantly. The country's power consumption is expected to increase from an estimated 47.2twh last year to 55.5twh by the end of the forecast period, requiring imports falling from 10.2twh in 2006 to no more than 9.2twh in 2011, assuming 4.3% annual growth in generating capacity.