The Hungarian economy grew by 4.8 per cent in the second quarter of 2018, and such quarterly rate has been unprecedented since 2005. The Hungarian GDP growth rate according to the EU methodology is double the EU average, one of the fastest in the CEE region. This is the zenith; the growth rate will slow down. The rate of increase in investments financed by pre-payments of EU transfers and in household consumption, boosted by the elections as well, is expected to slow down during the rest of the year. In addition, a slight deterioration is expected in external demand as well. Based on the better than expected figures of the second quarter, GKI raised its GDP forecast for 2018 to 4.2 per cent from 4 per cent and its investment forecast to 12 per cent from 9 per cent. However, it expects a marked slowdown in 2019, a growth rate of around 3.2 per cent. External equilibrium is likely to remain very favourable in 2019, inflation is expected to accelerate, and fiscal and monetary policy tighten only slowly. Possible corrections of economic policy will hardly affect the substance of the one-centred Hungarian political model.
The GKI economic sentiment index reached its historic peak in July and its lowest point this year in August. It continued to decline in September, and fell close to its level a year ago. According to the empirical survey conducted by GKI with the support of the EU, business expectations also reached their level a year ago, whereas the consumer confidence index rose after its decline in July and August.
Although the Hungarian economy grew faster than expected and most EU member states in the second quarter of 2018, its growth rate calculated by the EU methodology has been slowing down for six months. According to market forecasts, GDP growth will exceed 4 per cent in 2018 (GKI upgraded its forecast to 4.2 per cent). It will fall to nearly 3 per cent next year, which would be among the lowest in the CEE region where the decline will be more moderate. The rate of increase in investments financed by EU transfers and in household consumption, boosted by the elections as well, is expected to slow down during the rest of the year. There is growing uncertainty and slowdown in the EU, due to, for example, the Turkish and the Italian situation, the threat of a trade war and the Fed’s interest rate rises.
After reaching its historic peak in July, the GKI economic sentiment index fell to its lowest point this year. According to the empirical survey conducted by GKI with the support of the EU both business and consumer expectations deteriorated, but they continue to reflect optimism.
The GKI real estate index rose to 4 points in July 2018, while the Budapest index stood at 5 points. The index has increased by nearly 2 points and the Budapest index has gone up by 3 points, compared to the previous survey conducted in April. Both indices have increased by 4 points, compared to one year earlier and reached their historical peaks indicating that real estate market players have never been so optimistic during earlier surveys.