One of the key problems of the domestic real estate market currently is the slow replacement of old residential property units by new ones which may lead to a shortage of quality housing in the longer term. In the first, second and third quarters of 2015, the number of newly built residential units fell by 9.5 percent year-on-year, while the number of building permits rose by 24 percent in the same period, signalling a favourable outlook.
According to the latest data, the positive employment trend has been unbroken in Hungary. In the period July-September 2015, the number of people in employment aged 15-74 years gained 116 thousand year-on-year, rising from 4 million 149 thousand to 4 million 265 thousand.
Compared to the previous year, in 2014 the volume of R&D expenditures in Hungary was up by 5 percent, to HUF 441bn within the national economy. Although as a result of robust GDP growth the share of R&D expenditures as percentage of GDP edged down from 1.41 percent in 2013 to 1.38 percent, data signal that Hungary is set to meet the projected R&D growth target assumed in the Europe 2020 strategy and maintain its favourable position within the Visegrad Four. It has to be noted that the role of enterprises has gained weight as the positive trends concerning R&D spending and financing persisted: these indicators have reached 72 and 48 percent, respectively.
In the third quarter of 2015, two office development projects were completed in Budapest: building “A” of the Erzsébet office complex and the second block of the owner-occupied Bosch Centre. These have added as a whole 27 800sqm to the existing volume of modern office space in Budapest, which now totals 662 300sqm of owner-occupied and 2 615 600sqm of rented office space. The vacancy rate continued to decrease and reached by 13.5 percent by the end of the third quarter. This has been the lowest figure in seven years, following a drop of 3.4 percentage points year-on-year and 0.7 percentage points quarter-on-quarter.
Similarly to 2014, the upward trend in the number of arrivals at domestic accommodation establishments continued throughout 2015, as the report of the Hungarian Central Statistical Office (KSH) published on 12 October shows. In August 2015, the number of guests registered at accommodation establishments was 5.3 percent higher year-on-year. Within that, the share of foreign and domestic guests was nearly the same. In the period January-August 2015, data show an increase of 6.4 percent year-on-year. The volume of gross revenues at accommodation establishments also soared, gaining 14 percent over the past one year. In comparison to the Visegrad Four and some neighbouring countries, Hungary recorded one of the best year-on-year growth figures concerning the number of arrivals at accommodation establishments.
The value of both Hungarian exports and imports in the month of August 2015 grew by 6.2 percent, and thus the foreign trade sector posted a surplus of EUR 25 million in comparison to the corresponding period of the previous year. In the initial eight months of the year, the value of exports and imports increased in Euro terms by 7.4 percent to EUR 59.4bn and by 5.6 percent to EUR 54.1bn, respectively, year-on-year. Thus, the sector’s surplus was up by EUR 1 214 million.
In June-August 2015, the number of people in employment was 4 million 251 thousand, up by 134 thousand year-on-year. The employment rate of those aged 20-64 years rose to 69.5 percent, edging closer to the 75 percent figure, Hungary’s target in the Europe 2020 Strategy. In this period, the unemployment rate fell by 1.0 percentage point, to 6.7 percent. Especially the employment and unemployment indicators of men changed favourably.
According to the quarterly inflation report of the National Bank of Hungary published on 24 September 2015, Hungary’s economy has continued to expand. The main driver of economic growth was the recovery in domestic demand. Inflation remained subdued in Summer months, and the inflation rate is expected to be below the medium-term target of 3 percent both this year and next. Base effects were in line with the forecast of June, while the slight discrepancy within the overall consumer price index is attributable to lower-than-expected fuel prices. The global cost environment as a whole is highly favourable for Hungary, thanks partly to the substantial drop of raw material prices over the past months. Private sector employment growth continued in the second quarter, while wage dynamics remained moderate. This favourable cost environment is expected to persist over the outlook horizon.
The medium- and long-term development path and opportunities of the Hungarian economy are determined by three major fundamentals. First, it is a medium-sized economy (with GDP of USD 255.3bn ranked as 54th largest out of the 188 economies observed by the IMF); second, it is an open economy in terms of foreign trade (exports/GDP, imports/GDP ratios); third, due to the lack of competitive, large domestic corporations the private sector is missing a key pillar. This latter factor had adversely affected Hungary’s GNI-to-GDP ratio for decades which trend could only be reversed by direct measures in the past four years.
Due to steadily rising domestic purchasing power, improving labour market conditions, increasing wages in real terms as well as to Government measures which are having a substantial positive effect on household incomes, the Hungarian retail sector has been expanding for more than two years. Other driving forces include more efficient controls by tax and other state authorities as well as the reduction of shadow economy resulting from the connecting of retail sector cash registers to the National Tax and Customs Administration through the internet.