In the third quarter of 2014, the Hungarian economy grew by 3.2 percent year-on-year. This GDP growth figure is well above prior expectations as economic fundamentals facilitating the expansion have become sounder and more sustainable also in the long term. In the EU, Poland registered the largest growth with 3.4 percent, while Romania and Hungary share the second place in the ranking with regard to the observed period.

Following the previous two quarters, Hungary’s GDP grew again by more than 3 percent in the period July-September – according to preliminary data of the Hungarian Central Statistical Office (KSH). In comparison to Q2 2014, GDP was up by 0.5 percent. Steady GDP increase is a favourable sign, especially as the Hungarian economy expanded significantly in spite of the fact that in the observed period factories temporarily halted production due to summer recess and the negative impact of the embargo against Russia which entered into effect in August.

The performance of the industrial and agricultural sectors has been the main driver of growth. Detailed monthly statistics show that industrial and construction sector output increased by 7 percent and 13 percent, respectively. Despite the high base, the agricultural sector also contributed to economic growth. The rebounding services sector has been bolstered by positive tourism data, outstanding retail sales and transport sector statistics.

On the consumption side, both construction sector output growth and the increase in home constructions signal an upturn in investment. Investment was also underpinned by EU funding, low interest rates, the Funding for Growth Scheme and accelerating private sector activity. Lower consumer prices, the increase of wages in real terms due to positive labour market processes, improving consumer confidence as well as a pick-up in retail sales are all pointing to further consumption growth.

Economic expansion also causes income growth which in turn will lift household spending. In addition, it improves fiscal balance and has a positive influence on the labour market: over the past year the number of people in employment has increased already by 200 thousand, mainly due to private sector hiring.

In comparison to the first half of the year, the deceleration in the rate of growth within the EU and especially the euro-zone was far larger than in Hungary, therefore the country is expected to be among the EU’s top performers.

The economy has been growing since the second quarter of 2013. In case this trend continues, full-year growth may exceed the official estimate of 3.2 percent published in the autumn outlook of the Ministry for National Economy.

(Ministry for National Economy)