Growth in the V4 countries – Czech Republic, Poland, Slovakia and Hungary – notes Matthias Benz, of the Swiss daily Neue Zürcher Zeitung, has become much more dynamic than in the western EU member states. In an article entitled, “A new Eastern European boom,” Benz argues that the present positive economic trend in the region relies on more solid foundations than the one prior to the 2008 economic crisis. The reasons behind the development are two-fold.
First, as we learned from the financial crisis, the Hungarian economy is more stable today because we have limited our exposure and reduced our dependence on foreign capital. Fitch Ratings said recently that their net external debt indicator, a measurement of public and private sector debt owed to foreign lenders, showed that Hungary’s net external debt has decreased from 53 percent in 2014 to nine percent this year.
Secondly, Benz argues the current upswing has a broad foundation: domestic consumption is roaring, wages are on the rise and unemployment is at historic lows.
On top of that, Fitch, joining Standard and Poor’s, the IMF, the European Commission and other market participants, recognized Hungary’s economic achievements by upgrading its credit outlook from stable to positive. The credit outlook indicates the potential direction of a rating over the intermediate term, typically six months to two years. Fitch has also noted that Hungary’s general government debt-to-GDP ratio is expected to fall as low as 69 percent by 2019. Minister Varga remarked, “This level is still too high in comparison to our peers; the repayment of loans taken out by leftist governments will continue to weigh on us for a long time to come.”
The International Monetary Fund also had good things to say recently. In the November issue of their regional economic outlook report, the Fund raised previous forecasts of Hungary’s GDP growth to 3.2 percent this year, followed by 3.4 in 2018. The IMF also projects that the unemployment rate will continue to fall, dropping below the current record-breaking 4.4 percent.
Particular sectors of the economy are performing exceptionally well. In September, the construction sector’s output grew by 23.8 percent year-on-year while total industrial output increased 5.4 percent. Since January 2010, the sector has been up by more than 35 percent and the expansion is expected to continue.
The European financial press, credit rating agencies and international financial institutions seem to agree: the Hungarian economic recovery is taking off.