By Gergely Szakacs
BUDAPEST, Dec 4 (Reuters) - Hungarian consumers are poised to cast aside concerns about the country's deep financial crisis and go on a spending spree in the run-up to Christmas, retail sector representatives and pollsters predict.
But retailers could face a hard landing in the new year, when Hungarians' disposable incomes are predicted to fall further and the economy, which averted meltdown in October with the help of a huge IMF loan, slide into recession.
Retail sales volumes have been trickling lower since January 2007, but despite mounting job losses and a projected fall in real wages next year, prospects for seasonally high consumer demand at the end of the year look strong.
"In contrast to earlier prospects, Christmas now looks a bit more encouraging given a recent increase in demand," said Gyorgy Vamos, chief secretary of the National Trade Association, a body incorporating the 300 biggest retailers in the domestic market.
"In the food segment, sales will most likely outperform last year. As for consumer goods, the situation is not quite that rosy (for the whole year), but chances are that December can catch up to last year's levels."
Last December, typically a make-or-break month for retailers, Hungarians forked out 888 billion forints ($4.30 billion) in shops nationwide as a frenzy of consumer loans sent demand for pricey digital appliances and other goods soaring.
Vamos said a recent decline in fuel and food prices as well as cheaper holidays due to a strong forint during the summer freed up extra cash, leaving consumers more leeway for a holiday shopping spree.
Consumer electronics maker LG said over half of respondents in a survey planned to match or outspend last year's purchases, mainly on mobile phones and flat-screen TVs. Bela Turcsanyi, 76, a pensioner and former engineer, plans to buy a portable DVD player for his daughter living abroad.
"She has a laptop but the DVD player broke down so I would like to buy her one of these," Turcsanyi said in one of Budapest's teeming consumer electronics stores.
"Price is the main factor. I would like to land one of these for about 40,000 to 50,000 forints," he said.
A survey by pollster Szonda Ipsos also showed, that despite the crisis, Hungarians are still spending and appetite for consumer loans remains strong.
"Regardless of Christmas, we would like to replace our TV set. I'm looking at TVs for about 200,000 forints," said Gabor Nemet, 41, an IT systems engineer.
'DEAD CAT' BOUNCE?
But with the central bank's worst-case scenario projecting an up to 1.7 percent fall in gross domestic product in 2009, retailers may be in for a shock once consumers sober up.
The government expects household consumption to fall by 3.1 percent next year and disposable income to be dampened further by a freeze in wages for around 700,000 public sector employees.
Despite a last-minute bounce in spending this month, rising unemployment and tighter credit conditions are set to leave Hungarians, already short on savings, with little disposable income.
Economic think-tank GKI's consumer climate index hit a record low in November, dragged down by downbeat forecasts for savings and employment.
Last Friday more than 3,000 jobs, or about one in every 750 registered work-places, were lost in a single day, and some economists believe unemployment could rise above 10 percent next year from 7.7 percent in August-October as the economy grinds to a halt.
"In such a scenario it is out of the question that retail sales should increase next year," Vamos said. "Measured in volume, kilograms, litres, or overall amount, there will be a decline in the market."
The government has said Hungary's economy, just about to gather steam after a painful fiscal adjustment when the crisis hit, could be in a recession for up to a year and a half.
"I have to say next year looks very depressing," Turcsanyi said. "For the time being, we forget about next year. This year is this year. As for what happens next year, I cannot tell."
(Reporting by Gergely Szakacs; editing by John Stonestreet)