In Q4 2015, the Hungarian economy posted larger-than-expected growth of 3.2 percent year-on-year and 1 percent quarter-on-quarter. In the whole year, GDP grew by 2.9 percent. The upward growth trend, which has been unbroken for three years now, shows that Hungarian reforms are working.

GDP data indicate a stable and balanced growth structure, as expansion has been based on multiple factors and has been underpinned by almost every sector. The acceleration of the disbursement of EU funds and persistently low oil prices fuelled domestic demand, the industrial sector and exports. Along with the motor vehicle and related manufacturing sectors, the electronics and metals industries also contributed to growth in the observed period. Within the services sector, the performance of the tourism branch was noteworthy, as the number of tourism nights grew by 5.4 percent last year. In the final quarter of 2015, the volume of retail sales gained 4.7 percent year-on-year: the revival of domestic demand was driven by rising real wages and a record-high employment rate. The agricultural sector was an underperformer, without the negative growth of the sector – according to the calculations of the Ministry for National Economy – Hungary’s GDP would have expanded by about 3.8 percent.

GDP growth in Hungary continued to beat the EU average. Parallel to economic growth, the government debt-to-GDP ratio has also improved. Hungary’s external and internal positions also saw improvement: last year, the foreign trade sector posted a surplus of EUR 8bn, and the state budget deficit is expected to be slightly below 2 percent of GDP. GDP growth was also reflected in higher tax revenues: among others, the massive increase of VAT revenues shows strong economic growth momentum.

The Government is doing everything in its power to offset the transitory slow-down and in 2016, the expected consequence of the shift between two EU programming periods, and establish a steady growth trend. Accordingly, the Government has decided to disburse more than HUF 2000bn of EU funding this year in Hungary. In addition, the new Housing Programme, the cutting of administrative burdens, lowering taxes, corporate lending schemes and the reform of vocational education are expected to improve the growth potential of the Hungarian economy also in the long term.

(Ministry for National Economy)