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Jan 16, 2018 - Zoltán Kovács

Hungary’s economy gaining steam: GDP growth up, unemployment down, more growth to come in 2018

Hungary’s economic turnaround is gaining steam. Official data from the fourth quarter shows GDP growth will reach 4.1 percent in 2017, and the unemployment rate has fallen to 3.8 percent, Minister for National Economy Mihály Varga said recently.

The year 2018 has the Hungarian economy starting from a better position and with a better outlook than it did in 2017, said Minister Varga, adding that the growth we’re seeing is balanced and sustainable.

Compare that to where we were back in 2010, before the Orbán Government took over. Hungary’s debt and deficits had spiraled out of control to the degree that the Socialist-led government had to turn to the IMF for an emergency bailout in 2008, saving the country from default.  Household debt was also weighing on the economy as families struggled to make payments on foreign currency-denominated loans, and the active labor force had shrunk to alarming levels. Today, the numbers tell a much different story. Foreign currency-denominated loans have been eradicated, and interest rates are at historic lows. The government deficit has been kept below the three percent EU threshold since 2012, and the debt-to-GDP ratio is falling. Hundreds of thousands have rejoined the active labor force, and wages are increasing. The country’s credit rating has been restored to investment grade by major ratings agencies and sales of government bonds continue to run oversubscribed. Growth is up. Unemployment is down – to record lows.

Regarding the latest growth figures, the expansion of retail sales, the performance of the construction industry and increased investment support expectations that the economy grew by more than 4 per cent in the last quarter of 2017, Minister Varga said. The Hungarian economy is growing on stable foundations, supported by manufacturing (in particular in the automobile industry) and tourism, in addition to the construction sector.

Investment also played a major part of growth in 2017, with a volume increase of more than 20 percent, fueled in part by the government’s Family Housing Allowance (CSOK) program. According to the latest data, financial institutions received more than 63,500 CSOK applications for support, totaling 177 billion HUF, the minister said.

At 3.8 percent, unemployment has fallen to a level not seen in the 27 years since the regime change when the state began to track the jobless figure. The number of people who make a living from work has increased by 750 thousand, reaching more than 4.4. million since 2010, out of which 570 thousand new jobs were created in the private sector. While the number of people working in the primary labor market has increased by 85 thousand over the last year, the number of those working abroad has fallen by 11 thousand and the number of public work employees has also fallen by 37 thousand, the minister said. 

Beginning January 1, the government is increasing general childcare benefits as well as benefits for university students and graduates.

With wages on the rise, consumption is also expected to grow, along with anticipated further growth this year in the construction and tourism sectors.

The economic recovery is gaining steam.