The Hungarian economy offers investors a growth rate three times above the EU average, an improving business environment and lower taxes, Finance Minister Mihály Varga said recently, highlighting the reasons that foreign investment, including from companies from the Far East, has been on the rise.
In fact, there’s a lot of positives to point to in recent data on Hungary’s economic performance.
For 2019, experts predict an additional 20 percent expansion in the construction sector, supported by the government’s Family Protection Action Plan, as well as record-high employment and a generally favorable investment environment. In a statement earlier this week, Minister Varga said that so far, the Hungarian government has spent nearly 300 billion HUF (over 9 million EUR) on assisting more than 100 thousand families to acquire new homes.
Meanwhile, we’ve just received two particularly important economic indicators for 2018.
Since 2010, according to the figures published recently by the Central Statistics Office (KSH), Hungary’s public debt fell by 10 percentage points, marking the fifth largest drop in the European Union. Last year alone, public debt plummeted by 2.6 percent, from 73.4 to 70.8 percent of GDP, which means that Hungary’s formerly overwhelming pool of financial obligations has been declining steadily for six consecutive years.
The government deficit last year came in under target at 2.2 percent of GDP, Minister Varga said, adding that in line with the ministry’s expectations, the numbers continue to stay well below the 3 percent limit prescribed by the Maastricht criteria.
“The foundations of growth are stable, as it’s not fueled by external debt, but occurs thanks to the rising wages and the number of employed people, expanding consumption, the well-performing industrial and construction sectors and the realized investments,” Varga said.
This year, however, the Orbán Government has set out even more ambitious goals: we plan to keep budget deficit under the 1.8 percent mark and drive public debt below 70.
In 2018, as also featured on About Hungary, Hungarian workers saw the speediest real wage increases in the European Union. Data from Q1 2019, shows a staggering 11.4 percent average gross wage growth bundled with an 8 percent increase in both minimum wages and guaranteed wage minimums. Hungary’s domestic consumption is buzzing as people have more money to spend.
I posted previously about FDI setting records in 2018: 98 large, foreign investments valued at approximately 4.3 billion euro, creating more than 17 thousand jobs. Of the 98, 28 came from German firms. Another 17 came from South Korea, India, Japan and China. And that’s only 2018, a year in which Hungary was ranked as the eighth most attractive place to invest in the world.
This economic performance is what has produced a record-breaking 4.9 percent annual GDP growth, the highest in the last fifteen years, and it’s one of the many reasons why credit rating agencies and investors are so upbeat about Hungary’s recent economic performance.
Despite all this, we’ve seen critics asserting an argument that Hungary’s economic growth is completely dependent on EU structural funds. That doesn’t stand up to even superficial scrutiny. EU funds in 2018 amounted to no more than 4 percent of Hungary’s GDP.
Under the Socialist-led government, prior to 2010, when Prime Minister Orbán took office, Hungary was an IMF emergency bailout case. People worried about default, as our debt and deficits spiraled out of control. Today, after nine years of Orbán Government, Hungary ranks among the EU leaders in terms of GDP growth and we’ve made good on our promises to bring deficits under control and slash debt.
Not all EU members can say the same today.