The Gross Domestic Product has never increased in Hungary at the rate recorded in the second quarter of 2014. As the preliminary data indicated, the Hungarian economy expanded by 3.9%, which represents a growth rate of 0.8% in relation to the previous quarter. The way in which we managed to maintain a balanced budget alongside recording growth is particularly favourable, i.e., the budget deficit is consistently below 3%. The Hungarian economy is performing exceptional well in EU, as well as regional comparison. Hungary's economy grew at the fastest pace in the EU in relation to the same period of the previous year.

This stable and dynamic growth was mostly achieved thanks to the better performance of the production sectors, as well as the recovery in domestic demand. The production sectors contributed most significantly to this growth rate in the second quarter as well, with a 5.6% growth rate recorded in agriculture, 7.2% in the industry and 19.1% in the construction industry.

Despite the high base value, the growth rate recorded in agriculture was higher than expected thanks to favourable weather conditions. Higher foreign and domestic demand in the auto industry contributed to the increase in industrial production. The performance of the service industry gradually improved over the past period, recording an overall 2.1% increase in the second quarter. More specifically, higher consumption boosted trade, favourable tourism data impacted tourism, while industrial production increased transport activities. The declining performance seen in the financial sector eased primarily thanks to the central bank's Funding for Growth Scheme.

The 20% increase in investments was equally backed by the recovery of the construction industry, EU funding, low interest rates, the Funding for Growth Scheme and strong growth in the corporate sector. This increase in investments is favourable, since accumulated expenditures underpin economic growth in the long run. Household consumption further accelerated (by 2.4%), which growth rate was last recorded eight years ago. The low inflation rate and higher rate of employment, hence, the increase in real wages and boost in consumer confidence, are behind this favourable data.  

In overall terms it is plausible to suggest that the structure of growth is healthier and more balanced. The way in which we managed to maintain a balanced budget alongside recording growth is particularly favourable, i.e., the budget deficit is consistently below 3%, while a there is a significant surplus in the balance of payments.

Economic growth also engenders an increase in income and has beneficial impact on the labour market. The latter is well-demonstrated by how the number of individuals employed increased by approximately 200,000 over the past year by the second quarter of 2014, with major contribution from the private sector as well.

The pace of growth is expected to somewhat slow down in the second half of the year due to the Russian-Ukrainian conflict and the high base value of the previous year, in spite of which an overall 3.1% growth rate is forecasted for 2014.

(Ministry of National Economy)