Hungary’s GDP expanded by 5.1 per cent in the second half of 2018 year-on-year and by 4.9 per cent in 2018. This high growth rate has been unprecedented for 15 years. Due to the higher than formerly expected GDP growth rate and the stimulation measures of the government such as the family protection action plan, GKI raised its forecast for 2019 to 3.5 per cent in spite of deteriorating global projections. GDP growth has been driven by domestic demand for three consecutive years whereas the contribution of EU transfers to the acceleration of economic growth has moderated significantly. Inflation is picking up, and the pro-cyclical nature of Hungary’s economic policy is easing rather than disappearing. The corrections of economic policy do not touch the substance of the Hungarian model.
Although the GKI economic sentiment index was rising constantly in the last quarter of 2018, it declined slightly but steadily during the first quarter of 2019. The deterioration in March, as in February, was attributed to unfavourable business sentiment since consumer expecta-tions improved somewhat both in February and March, and they reached the level record-ed at the end of 2018. Hungarian economic actors continue to show strong optimism.
The Hungarian economy grew by 4.9 per cent in 2018, and it was probably the second fastest growth rate in the EU after Poland. In the past decades, faster growth was registered in Hungary only once, in 2004. All forecasts expect a significant slowdown in 2019. GKI predicts a rate of around 3.5 per cent. GDP growth in the EU is also slowing down, and the European Commission cut its growth forecast from 2 per cent to 1.5 per cent in 2019, after last year’s 2.1 per cent. Although the indicators of economic disequilibria are favourable (two credit rating agencies upgraded Hungary’s general government debt), the foreign trade surplus is falling significantly, and inflation and the general government deficit are among the highest in the EU. Over the past few weeks, a tsunami of government programmes swept across the country.
Although the GKI economic sentiment index was rising constantly in the last quarter of 2018, it declined during the first two months of 2019. Of business expectations only expectations of construction companies improved in February. In spite of the upward movement of the index in February, consumer expectations fell short of their level at the end of last year. However, Hungarian economic actors continue to show strong optimism.
In January of 2019, the GKI real estate indices for Budapest and Hungary stood at 9 and 11 points respectively. Budapest index decreased by almost 2, the national index rose by 3 points compared to the previous (October 2018) survey. Both indices went up 11 points compared to the survey made one year earlier. The national index reached its historical peak, the capital index is not much less than its historical peak. General optimism lasts longer. There are ‘no clouds on the sky’ of the Hungarian real estate market.