The 2020 country report on Hungary published today by the European Commission (EC) provides a balanced picture of the Hungarian economy’s results and acknowledges Hungary’s favourable macroeconomic processes.

The study determines that the Hungarian economy has achieved an average rate of economic growth exceeding 4 percent during the past four years, a figure which is outstanding in European comparison, and the economy’s above EU average performance is expected to continue during the upcoming years.

The report highlights the fact that last year the Hungarian economy was capable of tangibly withstanding the international and European economic slowdown in view of the fact that the main contributors to growth are domestic demand and a high level of investment activity. The strong increase in wages and the favourable loan opportunities, including the ‘baby shower’ subsidy introduced last July, will continue to boost consumption and investment in the upcoming years. According to the EC’s opinion, a slightly more conservative, but still high level of growth can be expected in 2020.

Hungary’s sovereign debt to GDP ratio remains on a continuously decreasing trajectory, and according to the Commission this will continue to be the case in line with the expectations of the Hungarian government, thanks to the combined effect of a low budget deficit and high economic growth. In addition, the vulnerability of public finances to international money market fluctuations has been further diminished via a reduction in foreign currency debt and the increasing role being played by the Hungarian public.

The country report determines that the capitalisation of the Hungarian banking system is adequate, it operates profitably, and is resistant to unfavourable macroeconomic developments, in addition to which the ratio of defaulted loans has continued to decrease and the number of new loans has seen a high level of growth. Similarly to last year, the report also highlights the good performance of the job market, which continues to be one of the characteristics of the Hungarian economy.

The level of employment has reached a new, historic high, with the rate of unemployment falling to below pre-crisis levels and wages increasingly significantly over the past two years. With relation to the field of taxation, the Commission places greater emphasis on acknowledging the government measures aimed at whitening the economy, particularly highlighting the significant reduction in the VAT gap and the improvement in the efficiency of VAT collection. Similarly to last year, the EC report once again praises the measures introduced to simplify the tax system, including the reduction in the number of different taxes and the merging of certain employee contributions.

(Ministry of Finance)