articleimg-1
Jan 03, 2018

Hungary's GDP growth rate far above EU average

Official data from the fourth quarter shows a GDP growth rate of 4.1 percent in 2017. This figure is well above the EU average, and that signals that Hungary’s economic convergence has continued, Hungary's economy minister said

Hungary’s minister of economy has said that in 2018 the country starts from a better position and with a better economic outlook than in 2017.

Mihály Varga, minister for National Economy, said that the Hungarian economy has been growing dynamically, in a balanced and sustainable manner.

Official data from the fourth quarter shows a GDP growth rate of 4.1 percent in 2017. This figure is well above the EU average, and that signals that Hungary’s economic convergence has continued, the minister said.

Growth has been broadly based with almost every sector having contributed to expansion. In 2017, investment was a major growth factor, with a volume increase of more than 20 percent, fuelled by the government’s Family Housing Allowance (CSOK) program.

The minister said that thanks to rising wages, consumption is also predicted to rise, and the ministry is expecting further output growth in the construction and tourism sectors.

The latest data also shows that more than 4.4 million people have a job now in Hungary, and this constitutes substantial improvement compared to 2010.

Hungary’s outlook is seen as positive at two out of the three major credit rating agencies, and although ratings are usually not changed before an election, during the course of the year an upgrade may still be expected, he said.

The government debt-to-GDP ratio is set to remain on a descending path. As we reported yesterday, debt-to-GDP fell from 76 percent in 2016 to 74.5 percent by the end of 2017.

The Hungarian government also fulfilled its committment to reduce taxes. The rate of corporate income tax was cut to 9 percent as of 1 January 2017, the lowest figure within the EU. The rate of social contribution was last year reduced by 5 percentage points (from 27 percent to 22 percent), and in 2018 it is to be further reduced by 2.5 percentage points (to 19.5 percent) – leaving 200 billion HUF with companies, the minister said.

The one percent reduction of the rate of small enterprise tax (KIVA) to 13 percent is yet another favourable change for SMEs.

As a result of the six-year wage agreement concluded last November, the minimum wage (for unskilled workers) and the guaranteed minimum wage (for skilled workers) will be raised again in 2018, from 127 500 HUF to 138 000 HUF and from 161 000 to 180 500 HUF, respectively.

As we also reported yesterday, Hungary faced several legal changes on January 1st, 2018, including an increase in general childcare benefits as well as benefits for university students or graduates, added support for mortgage holders and the option of relief on student loan repayments.