In the first quarter of 2018, Hungary’s economy was on a steadily ascending growth path; GDP grew by 4.7 percent year-on-year. Incoming data confirm the strong growth potential of the Hungarian economy, incoming Finance Minister Mihály Varga said.

While unadjusted data show growth of 4.4 percent, data adjusted for seasonal and working day effects, which are better at displaying underlying trends, point to even more remarkable growth of 4.7 percent. The fact that there were two working days less in the first quarter explains the difference between the two figures, the Minister pointed out.

As both external and internal balance trends were favourable and growth has not been generated by over-borrowing shows that the current performance of the economy has been sustainable, he added. Expansion has been broad-based; almost every sector has contributed to overall growth. The economy’s outstanding performance has been to a large extent driven by growth in market services, and this also reflects the adequacy of Government measures implemented recently. The number one driver of growth nonetheless was the stimulating effect of the six-year wage agreement, thanks to which employees and enterprises have both gained extra income through wage hikes on the one hand and lower payroll taxes on the other, Mihály Varga noted.

The almost 8 percent increase in the volume of retail sales  in the first quarter, double the rate of growth registered in Q1 2017, is an indisputable sign of the stimulating effect of the agreement. The tourism sector has also posted strong, double-digit growth. The volume of housing construction increased at an unprecedented pace, posting growth of 65 percent, which shows the success of the Government’s Housing Programme. The global economic boom, growth in manufacturing investment registered in 2017 and recently announced, mainly automotive industry investment projects – which are to boost production capacities in the medium term – presage a favourable outlook in the industrial sector.

On the demand side, retail sales growth has been observed as consumption growth was also picking up. Wage growth of more than 10 percent, record-breaking employment figures and low inflation are seen to be the factors behind these positive trends. The volume of private sector investment is seen to have benefited from public sector investment, recently announced corporate investment and housing projects.

Hungary’s external trade balance posted a massive surplus of EUR 2bn in Q1 2018, a figure similar to that of the previous year. According to the latest data, the number of people in employment was 4 million 435 thousand in Hungary, as a result of private sector job growth of 125 thousand over the past one year.

Compared to the figure registered eight years ago, the number of people in employment has risen by 757 thousand, of which 600 thousand people have landed a private sector job which signals the sector’s continuous expansion, Mihály Varga said.

Hungary’s performance has also been impressive in international comparison: a recent Eurostat flash report shows that GDP grew on average by 2.4 percent at member states in the first quarter, and thus Hungary’s much faster growth helps close the economic gap with the developed countries of the EU.

(Ministry for National Economy)