According to the latest lending trend survey of the National Bank of Hungary (MNB) conducted in August 2015, demand for loans among Hungarian small- and medium-sized enterprises has increased. Although the propensity to take out loans has improved, corporate lending growth has remained lower than the level which the MNB considers essential for sustainable economic growth.
The domestic labour market has recently seen positive trends, as a result of which the employment rate has risen to the highest level in almost twenty-five years. Unemployment has also fallen, but the most important achievement is that a high share of formerly inactive people could be returned to the labour market. The favourable change in labour market indicators is attributable to several factors, including the more active role of the state, the improvement of domestic and foreign economic environment and the higher migration propensity in search of jobs.
After 2010, several market-friendly measures had been introduced in Hungary, which – coupled with the increased growth potential of the economy – resulted in lower costs at enterprises. By now, Hungary has become the most attractive country in terms of labour costs for the subsidiaries of corporations from EU member states, and it was also Hungary where unit administrative costs saw the largest drop within the Visegrád Four. It is also Hungary where starting a business is the fastest and cheapest and the obtaining of a construction permit takes the shortest period of time. The country has also made progress with regard to corporate taxes. Hungary tops the ranking concerning the time and costs of obtaining export licences. Practically, there has been improvement in every segment of the Hungarian economy and that may facilitate a successful economic policy in the coming EU fiscal period.
The Hungarian Central Statistical Office published the latest Farm Structure Survey on 23 July. This publication presents the key areas of the Hungarian agricultural sector and their potential as future contributors to economic growth. The value of agricultural output totalled HUF 1 228 million in 2013, while GDP added value was HUF 1 099bn, representing 4.4 percent of total GDP. The number of agricultural sector employees reached 190 thousand in 2014, constituting 4.6 percent of the country’s total labour force.
In May 2015, the volume of industrial output was up by 1.5 percent year-on-year. Motor vehicle manufacturing has remained the industrial sector’s growth engine. The workday-adjusted index grew by 6.2 percent, as there were two workdays less in May 2015 compared to May 2014.
In the first half of 2015, the Budapest Stock Exchange’s BUX index rose by some 32 percent, and thus it recorded the third highest increase among the world’s bourses, following Venezuela and Argentina.1 Among the blue chips of the Budapest Stock Exchange, the stock prices of Hungary’s largest bank OTP, oil company MOL, pharmaceuticals company Richter Gedeon and market-leader telekom service provider Magyar Telekom gained some 50 percent, 25 percent, 20 percent and some 21 percent, respectively, in the aforementioned period.
In Central and Eastern Europe, Hungary has the second highest exports-to-GDP ratio, while the contribution of industrial output to the country’s GDP is also remarkably high in the country. Since the regime change in 1990, Hungary has had one of the most open economies in the region, a fact that has also been proven by data of the recently published World Investment Report. In the region, Hungary has the third highest level of FDI, while the country has the second best per capita FDI figure. This implies that the country has been on the right track for reaching foreign trade objectives.
Economic and financial prerequisites are now given for the Hungarian economy to be placed on an innovation-driven development path: the country had managed to secure cost-efficiency for several years, while in the current EU fiscal period several resources have become available for remedying potential system deficiencies.
In January-April 2015, wages in real terms increased by 3.9 percent year-on-year. Wage growth was mainly influenced by an agreement this year on minimum wage and guaranteed minimum wage for skilled workers, the change in the number of public work employees and the knock-on effect of the salary reform within the healthcare and welfare sectors. Wages in real terms were up by 4.8 percent between January and April this year.
In the first half of 2015, several studies evaluated the economic fundamentals of Central and Eastern European countries from the aspect of the introduction of the common currency. One of the main conclusions was that Hungary showed significant progress compared to the situation some years ago. The country already meets three out of the altogether five so-called Maastricht criteria. In case of the fourth criterion -- although the general government debt-to-GDP ratio is still higher than 60 percent -- a steady positive trend has been in place and the level of state debt is already below the EU average. The fifth requirement of staying in the ERM II exchange rate mechanism for at least two years prior to joining the bloc is a technical criterion.