Reasons for optimism in 2017: Record low unemployment, tax cuts and robust GDP growth
If Hungary’s economic growth or business climate have anything to add to your happiness in 2017, the latest figures suggest that this year will indeed be a good one.
Hungary expects GDP growth to exceed 4 percent in 2017 and reach 4.3 percent in 2018. The latest data show Hungary’s best employment statistics since the democratic transition 27 years ago – national unemployment has dropped to 4.5 percent.
Analysts say that, following the government’s work to address structural weaknesses and rebuild solid foundations, economic growth is expected to double in 2017. Already in 2016, JP Morgan London signaled that forecasts for growth in 2017 would be robust.
The Hungarian Parliament recently accepted a package of tax cuts designed to “create the best business climate” in the region and includes a flat 9 percent corporate income tax – the lowest in Europe. At the same time, the government signed agreements with employer and employee associations to increase minimum wages, a move that is expected to boost domestic spending and give a further boost to growth.
A 15-25 percent increase in the minimum wage in 2017 and an 8-12 percent increase in 2018 is a concrete example of policies best described by Prime Minister Orbán as ‘not just providing employment, but also making it worth it to work.’ Both the reduction of the corporate tax burden and the great employment data help achieve this goal.
Hungary has slogged through six challenging years of economic recovery to overcome the serious mismanagement of the former, Socialist government that nearly drove Hungary off the cliff in 2009 into a Greece-like crisis. Looking ahead, now that the foundations have been restored, the next six years should see more development and growth, an economically much stronger Hungary.
And we’ll also see more stabilizing. The debt-to-GDP ratio is expected to shrink further, below 74 percent in 2016 (from 74.7 in 2015), and the annual budget deficit is going to remain well under the 3 percent Maastricht threshold as it has every year after 2011.
As 2017 gets underway, Hungary has every reason to be optimistic about the economy.