Economy: The Hungarian economy has overtaken and overtaken Slovakia

Despite the fact that the Hungarian economy grew strongly in 2019, GDP per capita was still sufficient at the end of the EU field, according to data from the EU statistical office, Eurostat. In terms of purchasing power parity (i.e. eliminating differences in price levels between countries), domestic GDP per capita was only half that of the wealthiest Western Member States (excluding Luxembourg and Ireland, which stand out far from the front and also perform well as tax havens).

The result is not surprising, moreover not bad at all, Hungary’s regional competitors are at a similar level and in fact, among the four in Visegrad, Hungary had the highest GDP per capita after the Czech Republic. This required Hungarian data to catch up and overtake Slovakia, a significant, unprecedented development. As can be seen from the graph below, Slovakia’s GDP per capita (in purchasing power parity) in the early 2010s was much higher than that of Hungary and Poland, which has moved in tandem. since then. Hungary and Poland gradually caught up with Slovakia over the decade, and in 2019 they caught up.

2019 still did very well

Initially, the Hungarian government expected only 4.1 percent growth for 2019, and finally the Hungarian economy was able to show much better growth of almost 5 percent in 2019. Overall, the Hungarian economy closed 2019 strongly:

• construction production increased by 21.7 percent (in the first four months of the year it was quite brutal, growth was 40-67 percent, in November-December the sector had slowed down),
• Despite a spectacular fall in industrial production in December, it grew by 5.4% year-on-year,
• unemployment fell to 3.3 percent from 3.6 at the end of 2018, going from 3.7 to 3.4 on an annual average,
• Data on wages is only available between January and November, with an increase of 11.2% in these 11 months,
• so there was something to spend on, retail sales increased by 6 percent (this is an annual indicator, hence the December figure)
• and inflation was 3.4 percent in 2019.

Growth in 2019, and even better growth in 2018, has not only caught up with the Slovak economy (at least GDP per capita), but has managed to get closer to the EU average in recent years. In 2019, Hungary’s GDP per capita (in purchasing power parity) increased from 73% of the EU average to 73.8%. Of course, in recent years, the region’s economies have typically been on a recovery path and, at the pace produced, the EU average is still a long way off. Not to mention Austria, which was mentioned often by Governor György Matolcsy, who performed well above average.

And then came the epidemic

All this, of course, is history, the growth of the countries of the region (including, of course, the Western Member States) has been interrupted by the epidemic, the restrictive measures introduced as a result and the economic crisis. Hungarian GDP 2020 II. Based on balanced data adjusted for seasonality and calendar, it decreased by 13.5% year-on-year in the third quarter. The recession had a historic pace, with only a decrease from 7% to 8% of GDP during the crisis of 2009, and it can also be said that Hungary’s second quarter decline was one of the largest in the comparison of the EU and quarterly basis.

As a result of the emergency situation caused by the coronavirus epidemic, the production of most branches of the national economy fell, and both services and industry contributed greatly to the development of economic performance. The performance of the national economy decreased 6.1 percent in the first half of the year, according to raw data.

For a long time, the central bank stayed true to its forecast that the Hungarian economy as a whole could produce even minimal growth in 2020, and in September this scenario (which was already optimistic at the time) was abandoned. In 2020, Hungarian GDP is expected to decline by 5.1 to 6.8 percent, which may be followed by an increase of 4.4 to 6.8 percent in 2021. Performance The economy could reach pre-epidemic levels in the 2022 round, the Central Bank’s Monetary Council wrote in its explanatory memorandum to its September 22 interest rate decision meeting.

Hungarian households hardly consume

Returning to the first results of 2019, it is worth noting that the GDP data is not the best indicator of how the population feels about the performance of the economy. This is best indicated by household final consumption expenditure within GDP, which shows how much households spent on consumption, that is, how well they ultimately lived.

In this indicator, Hungary remained the leader in 2019, still in terms of purchasing power parity, that is, in a way comparable to the member states. As in previous years, only the consumer spending of Bulgarian households was lower than that of Hungarians, regional competitors are improving, and not only the leading countries, but also the EU average were in the distance. By the way, the final consumption expenditure per capita of the Hungarian state (ie the general government sector, including local governments) was not, to put it mildly, at the bottom of the EU field. If you like, in an EU comparison, the state spends a lot, while households spend little. Spending and social costs are also included in state spending, but we know that the Hungarian state is not generous at all in this area.

The situation has not improved since then, and in terms of euros the outlook is even darker, which of course includes the drop in the forint exchange rate. According to the Gfk Purchasing Power in Europe 2020 market research survey, this year an average European citizen has € 13,894 of disposable income. A Hungarian has 6,871 euros, which is still the thirtieth on the continent. Compared to last year’s value of 7,416 euros, this year’s amount (at the current exchange rate of approximately HUF 2.5 million) represents a decrease of almost 7.3 percent, but is still above the value. of 2018.