Hungary’s economy has switched into a higher gear in 2017. According to the latest report by the Hungarian Central Statistical Office (KSH), in Q4 2017 and in the year 2017 the economy grew by 4.4 percent and 4.0 percent, respectively, year-on-year.

Data adjusted for seasonal and calendar effects show an even more positive picture, as in the year 2017 there were three working days less than in 2016, and two of these were in the last quarter. In light of these statistics, GDP was up by 4.2 percent in the year 2017 and by 4.9 percent in Q4 2017 – 0.1 percent higher than preliminary data showed.

These have been the highest growth figures in thirteen years.

However, compared to the situation in 2004, the current economic expansion has been stable, sustainable and broad-based. The fact that in 2017 all economic sectors except for agriculture, which has suffered from poor weather, have contributed positively to GDP growth confirms this assumption. Balance indicators also show sound trends: accelerating growth has not stemmed from rising debt. On the contrary: both the government debt-to-GDP ratio and the budget deficit have been kept persistently low.

The one-fourth of growth, about 1 percentage points, has been generated by the impact of the Government-initiated six-year wage agreement of November 2016.

The wage increase of 12.9 percent and job growth of 70 000 have resulted last year in net income growth of HUF 1 100bn and, accordingly, a higher standard of living.

On the production side, the market services sector was the main driver of growth, while on the expenditure side the volume of investment was the largest factor. Output growth in both the construction and industrial sectors has accelerated, thanks to the Government’s housing incentives, the utilization of EU funds, capacity expansion and the improvement in international economic conditions. The performance of the market services sector has improved in 2017 after having posted robust growth in 2016, mainly as a result of the six-year wage agreement.

On the expenditure side, consumption has been fuelled by lower payroll taxes.

In Q4 2017, GDP growth in the EU averaged 2.6 percent, in terms of both seasonal- and calendar-effect adjusted data.  Thus, Hungary’s economic convergence with more developed member states has gained momentum.

For the year 2018, the Ministry for National Economy expects GDP growth of 4.3 percent.

(Ministry for National Economy)