Beautiful ups and downs: GDP up, deficit down, foreign investment up, debt down, and wages on the rise
Hungary’s GDP growth is now approaching the second highest in the EU, in a year that saw record-low unemployment and rising real wages.
And the robust GDP growth is only one side of the coin. In 2018, Economy Minister Mihály Varga revealed last week, Hungary’s budget deficit came in at 2 percent, nearly half a percent lower than the expected 2.4 percent, while state debt declined to 71 percent.
Skeptics suggest that Hungary’s success simply follows regional trends, but numbers point to a different explanation, namely, to the government’s practical financial and taxation measures aimed at supporting workers, businesses and families.
Turning to foreign investment, Hungary broke a number of economic records in 2018, according to Minister of Foreign Affairs and Trade Péter Szijjártó. Last year was the most successful year of all time in terms of investment from abroad. Never before, the minister said, has the country seen so many foreign investment projects and never at such a high value.
Specifically, Hungary saw 98 major investments in 2018 thanks to the government’s investment promotion system, reaching a total value of 1.38 trillion forints. The investments created 17,024 new jobs, and the foreign companies paid an average monthly wage of 425,700 HUF, which is 40 percent higher than the average wage in 2017.
Those jobs helped Hungary reach record-low unemployment. The average three-month jobless rate has fallen to 3.6 percent. In the period from September to November 2018, the number of employed reached 4,495,000, an increase of 44,000 over the same period last year.
The latest numbers from the Central Statistical Office (KSH) show that Hungary’s third-quarter GDP reached an annual rate of 5 percent, a level two-and-a-half times the European Union average and the second highest among all member states.
The bullish economic performance has not gone unnoticed. London-based emerging markets economists at Morgan Stanley also reported positive data, upgrading their GDP forecasts to 4.6 percent for 2018 and 3.8 percent for 2019. According to the new CEEMEA Economic Outlook report, Hungary is still a comfortable outperformer compared with the euro area, and broadly in line with the CEE region overall.
Leading credit rating agency Moody’s has also affirmed Hungary’s Baa3 ratings with a stable outlook. Moody’s cited the government’s commitment to gradual fiscal consolidation, the economy’s growth and a generally “supportive institutional capacity,” projecting that Hungary’s GDP growth would reach 4.3 percent in 2018 and 3.4 percent in 2019.
The OECD also bumped up its GDP growth forecasts for Hungary from 3.6 to 3.9 percent in their November edition of the Economic Outlook report.
Besides bringing unemployment down, the government has made national health a priority. In addition to committing 14.1 billion HUF in 2019 and another 79.4 billion HUF in 2020 to a 72 percent increase of healthcare wages, the government is working to strengthen the Hungarian healthcare system. It will consolidate 55 billion HUF worth of debt held by hospitals and examine reforms for basic care and emergency care services.
We’ve said it before. We’ll say it again. Back when the Orbán Government rejected IMF-imposed austerity measure, reformed our tax laws to lower rates on income and profits and increased state support for families and home ownership, we were the black sheep of Europe. Those critics who called us unorthodox, where are they now?