Economic activity weakened in the third quarter. The outlook remains gloomy in the short term. Last September, the central bank ended its monetary tightening cycle in the face of downside risks to growth. This policy is currently not very consistent with the trajectory of inflation. Meanwhile, fiscal policy was tightened in the second half of the year due to the marked deterioration in budget deficit [...]
The Hungarian forint is amongst the worst performing currencies in Central Europe since January 2022. The forint has respectively lost 11 and 23 % of its value against the Euro and the dollar. The Central Bank of Hungary even intervened last week to shore up its currency. Why is the forint more affected than other currencies in the region? A few explanations below.
Economic growth remained very dynamic until the first quarter of this year. Strong wages growth and significant government measures to back up purchasing power over this period have supported consumer spending. Inflation rose sharply in recent months but remained lower compared to other Central European countries, due to a price cap on certain food and energy related goods [...]
Hungary is benefiting fully from a high international trade exposure, which is now driving its growth. Supply-side pressures are increasing, with high capacity utilisation rates and rising scarcity of labour. These local issues come on top of global industrial shortages. This has resulted in a significant acceleration in inflation, to which the Central Bank has responded with its first policy rate increase in 10 years [...]
The Hungarian economy was hit particularly hard by the effects of the Covid-19 pandemic in the 2nd quarter of 2020, due to the weight of exports in its GDP. The shock seems to have been absorbed relatively well, with the government and central bank focusing on supporting the labour market and introducing the necessary moratoriums on interest payments and loan repayments [...]
Hungary’s macroeconomic situation provides a good illustration of how Central Europe is flourishing economically, but has jettisoned some of the principles of liberal democracy, which is the crucible of the European Union. Hungary’s real GDP growth is estimated at an average of 4.5% in 2018, the highest level since 2004 and higher than its long-term potential. Endogenous and exogenous factors announce a downturn in the economic cycle in the quarters ahead [...]
Hungary’s Prime Minister Victor Orban, who intends to lead a eurosceptic, sovereigntist and anti-immigration front in European elections next May, can boast of a favourable macroeconomic situation. Economic growth continued to accelerate in 2018 thanks to a mix of expansionist economic policies, European structural funds and an upturn in domestic lending. GDP growth is estimated at an average of 4.5% in 2018, the highest level since 2004 and above its long-term potential [...]
Hungary has a population of 9.8 million people. The country belongs to the group of high-income countries. It became a member of the European Union in May 2004 but remains outside the Eurozone.
Macroeconomic fundamentals were relatively sound before the COVID-19 outbreak and have not been jeopardised by the fiscal and monetary stimulus implemented to cope with the shock. This support has driven strong GDP growth in 2021 (8%), mainly driven by exports and manufacturing sector performances. Inflation pressures have reappeared, triggering the first monetary policy tightening since 2011 as inflation should end 2021 at 4.6% on average, significantly above the 3% central bank target. Public debt has risen to 80% of GDP in 2020, but quantitative easing from the central bank is making it affordable. Relations with the EU must continue to be monitored. However, Hungary’s attractiveness for foreign direct investment (FDI) has remained strong based on cheap labour costs and economies of scale related to the size of its manufacturing sector