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.
GKI estimates that Hungary’s GDP expanded by 4.6 per cent in 2018 and this rate was remarkably high in the EU. The growth cycle is likely to have reached its peak, and the growth rate is expected to be around 3.4 per cent in 2019. Expansion continues to be driven primarily by domestic demand. However, owing to the high statistical base, the boosting effects of EU transfers will be significantly weaker in 2019.
After three months of growth, the GKI economic sentiment index dropped to its October level in January 2019. Business and consumer expectations slightly deteriorated as well, and especially the latter are less favourable than a year earlier. At the same time, both of them continue to reflect strong optimism.