The Hungarian economy increased outstandingly in the first half of 2019, by 5.1 per cent, the same rate as last year. Until now, this rate has been the fastest in the EU this year, about three times the average. Although the third quarter started well in July, industry and construction slowed down markedly in August. In addition, business expectations suggest no improvement in the coming months. However, the rate of inflation has also decreased since May, by a total of almost 1 percentage point until September. The state of public finances is also favourable, though after 2018 the current account is again in deficit this year, and the forint is weak. The deterioration in global economic conditions and the weakening of the stimulating effects of EU transfers anticipate a marked deceleration of GDP growth in 2020.
GKI’s economic sentiment index decreased within the statistical margin of error and reached its almost three-year low. According to the empirical survey conducted by GKI (www.gki.hu) with the support of the EU, business expectations rose slightly compared to their three-year low, whereas consumer expectations deteriorated a lot after two months of improvement.
In October of 2019, the GKI real estate indices for Budapest and Hungary stood at 7 and 8 points respectively. Budapest index decreased by 6 points, the national index went down by just 1 point compared to the previous survey (in July 2019). The capital index went down by 4 points, the other one practically did not change compared to the survey made one year earlier. Data of the present survey refer to a negative turnaround on the housing market. The era of soaring prospects and rising prices is now behind us. At the same time, there is nothing in the business real estate market, and especially in the office market, to suggest that the golden age is coming to an end.
The Hungarian economy grew by 4.9 per cent in the second quarter of 2019, faster than expected. This was the highest growth rate in the EU. However, the slowdown, if only to a very small extent, has begun (the growth rate was still 5.3 per cent in the first quarter). According to the data of the first half of 2019, growth of the Hungarian economy is driven by investments and consumer demand. Domestic demand grew by 5.5 per cent, faster than GDP (by 5.1 per cent). The foreign trade surplus continued to go up in the second quarter, and the slightly increasing surplus of services could not offset the significantly deteriorating merchandise trade balance. GKI’s current forecast of the annual GDP growth rate of about 4.3 per cent in 2019 is in line with the recent expectations of the government and the National Bank of Hungary.
The GKI economic sentiment index fell to its two-and-a-half-year low in September, within which business expectations plummeted to their lowest level in the past three years. However, consumer expectations improved slightly, they were more favourable than this last time in summer 2002. According to the empirical survey conducted by GKI (www.gki.hu) with the support of the EU, the fall of the business confidence index in September was significant (albeit compared to its temporarily increased August level). Such a high deterioration in a single month has not been seen for over ten years.