Government measures are expected to depress new car sales in Hungary this year following a fall in 2006 volume.

New car and sports utility vehicle sales fell by 5.6% to 187,842 units in 2006 and are seen falling to 170,000 in 2007, Gabor Gyozo, managing director of the Hungarian Association of Vehicle Importers, told Reuters.

“People just don’t have money,” Gyozo reportedly said, adding: The government’s austerity will hold back demand for new cars because people either don’t have the cash or, if they do, they’ll be more careful in spending and try to save up in anticipation of worsening living standards.”

The report noted that the government introduced tax and price hikes last year to curb government spending and reduce the budget deficit, which totalled around 10% of gross domestic product in 2006.

Those measures are expected to reduce household consumption by 0.7% in 2007 and new car sales are among the first indicators that the restrictive measures are hitting consumption, Reuters said.