Although Hungary’s GDP expanded slightly faster than expected in 2017, by 4 per cent and considerably faster than the EU average, its growth rate was moderate in the CEE region. GKI do not change its GDP forecast of 3.8 per cent and investments forecast of 9 per cent for 2018. However, it raises the projected increase in consumption from 3.5 per cent to 4 per cent. Although last year’s soar of construction slows down in 2018 due to the high statistical base, this sector continues to grow fastest. Similarly to last year, industry will grow by 5 per cent in 2018. The decline in agriculture in 2017 is expected to be followed by some increase this year. Public administration will stagnate, whereas some acceleration can be expected in the financial sector. Compared to its previous projections, GKI cut its inflation rate forecast from 3 per cent to 2.7 per cent, and its unemployment forecast from 4 per cent to 3.7 per cent.
In 1990 Hungary decided to employ the then prevailing model of economic transition from a state run economy to one based on market principles. It entailed mass privatisations of previously state run companies and the opening up of its borders in front of international capital without much mitigation with regards to its destination and long term objectives.
A study by GKI researcher Máté Veres for the Friedrich Ebert Stiftung. Download the study from here.
In 2017 the Hungarian economy expanded faster than expected, by 4 per cent. Although this rate is much higher than the EU average of 2.6 per cent, it is only moderate in the CEE region. The GDP growth rate may be close to 4 per cent in 2018 as well. The 17 per cent increase in investments in 2017 will slow down to about half of it this year, whereas the rise of consumption over 4 per cent will essentially remain unchanged. Although developments in the general government differed significantly from those envisaged in the budget in 2017, there was no review of the 2018 budget. As a result, probably the third highest deficit in the EU (2.4 per cent of GDP) is planned in Hungary in 2018, without sufficient reserves for the future.
After nearly one and a half years of almost continuous growth, GKI’s economic sentiment index rose to a new historic peak in February. According to the empirical survey conducted by GKI with the support of the EU, business expectations have never been more favourable than now, and consumer expectations were more favourable only once, during the few months of the Medgyessy government’s 100-day programme in 2002.
The GKI real estate indices for Budapest and Hungary stood at -1 and 1 point in January 2018, respectively. The Budapest index has dropped within the error margin, while the index for the whole country has increased 1 point, compared to the previous survey completed in October. Compared to one year earlier, the index in the capital has decreased 4 points and it has dropped 1 point for the whole country. The real estate outlook in Budapest peaked five quarters ago and a very modest decline is experienced since then. The national index reached its highest point a year ago and the present one is close to it.