Hungary Information Technology Report Q3 2012

BMI has held to its growth expectations for the Hungary IT market in 2012 against the backdrop of a continued difficult political and economic situation. Trading conditions are expected to remain challenging for IT vendors as household demand, business investment and government investment in IT products and services are restrained by deleveraging and fiscal austerity. However, there are signs that business spending could potentially be more positive, due in part to pent-up demand as a result of the economic situation. In Q411, vendors reported some stabilisation in corporate infrastructure project demand, and a pick-up in the flow of larger IT services tenders.
Headline Expenditure Projections Computer hardware sales: US$1.26bn in 2011 to US$1.27bn in 2012, +0.8% increase in US dollar terms. Forecast in US dollar terms unchanged after sluggish sales in 2011, but faster growth expected in 2013.
Software sales: US$729mn in 2011 to US$775mn in 2012, +6.3% in US dollar terms. Forecast in US dollar terms unchanged and in our view 2012 should see implementation of some systems upgrades previously deferred due to the bad economy.
IT Services sales: US$1.048bn in 2011 to US$1.054bn in 2012, with growth flat in US dollar terms. Forecast in US dollar terms unchanged as Hungarian corporations remain cautious, while public sector spending is weak
Risk/Reward Rating: Hungary''s score was 50.6 out of 100.0, with the difficult economic situation a drag on Potential Returns. Hungary took tenth place in our latest RRR table, and Hungary home computer penetration remains low compared with peer group countries.
Key Trends & Developments Many IT spending segments are therefore expected to remain weak in 2012. Key IT verticals such as telecoms and finance have been hit by government crisis taxes. Retail is another segment that has been hit. Should the forint depreciate significantly further, consumers and private enterprises would be subject to considerable pressure, which in turn would depress spending.
Telecoms operators reported solid growth in mobile broadband subscriptions in 2011 and this trend should help support sales of mobile connectivity devices such as tablets, which are bundled with service contracts. Credit is still tight throughout the economy however, and businesses remain cautious given the particular debt problems affecting the Hungarian economy.
Government IT spending will remain severely constrained by the fiscal situation, with the Fidesz-led administration committed to reining in spending in the face of fiscal constraints. BMI expects that government spending will remain below pre-2009 levels. However, the cloud computing opportunity is likely to spur continued development of the relatively small Hungarian data centre market. The government typically runs its own data centres, such as the one that was opened recently in Gyor, Western Hungary, which serves the Hungarian education system.