Final data for Hungary’s first quarter GDP data recently reported by the Central Statistical Office (KSH) have shown a marked improvement. According to all forecasts, the Hungarian economy will explode higher this year, thanks to which we will catch up with our 2019 performance.
It will be an unparalleled achievement because most Western economies will only be able to show the same thing in a year’s time.
In a quarterly comparison, the Hungarian economy expanded by 2 percent, which exceeded all forecasts. In addition, the country has already resumed its growth in the last quarter of 2020. In other words, we were able to experience a series of surprises: the figures published earlier also reflected a positive mood, the current figures, which are slightly better, can be said to be unexpected and suggest that the Hungarian economy is continuing to catch up.
From the detailed data provided by the KSH, it can be seen that on the production side, industry and agriculture were able to show a positive result in terms of the contribution to economic performance in annual comparison. At the same time, all sectors are beginning to recover, although there is no doubt that the service economy were still in the red due to the effects of the epidemic, but this was offset by the development of our exports. Overall, the figures from the statistical office support that the main sectors have already achieved surpluses.
Based on the latest data and details provided by the KSH, it is clear that as a result of the reopening, there will be a very significant growth potential in the Hungarian economy during the second quarter. In these months, services can be expected to pick up, and in the second half of the year, a combination of industry and construction will join.
Given the circumstances, the double-digit economic growth forecast for the second quarter, around 12 to 14 percent, seems justified. It can be quickly concluded that the Hungarian crisis management has yielded encouraging results in comparison with the European Union. In contrast to domestic growth, the EU shrank by an average of 0.4 percent, while eurozone countries shrank by 0.6 percent.
The robust performance of the Hungarian economy clearly indicates that we have a strong foundation, even with some restrictions still in place. Of course, the quarterly figure also predicts that as soon as restrictions ease and restrictions are lifted, explosive growth could develop. Market forecasts already show growth figures of more than 7 percent on an annual basis, which may be weakened at most by the epidemic and whether a second, more intense, wave develops. The duration and strength of vaccine protection will also play a critical role.
In this respect, too, the good news is that Hungary is in a good position relative to the EU in terms of vaccination. It already seems that the government’s decision not to rely solely on EU vaccine procurement was the right one.
And those who are afraid of an election budget should carefully review the bill on the central budget. There are no labeled, extraordinary benefits or aids in it. However, instead of beer and sausages, the government will reallocate 7,300 billion forints, or 13 percent of the GDP, in the draft budget for next year to restart the economy. And already this year huge sums are being spent on various investments.
This includes the fact that the Hungarian deficit and debt ratio does not stand out in Europe. For those who may have forgotten, the lesson of the 2008 global economic crisis was that it would not be appropriate to close the central money flow too quickly, as it would hold back growth and spark job losses.
Summa summarum: instead of a financial approach that often contains everything, the economic policy directive calling for the relaunch and restart of the economy has now won, supplemented by the monetary support of the Hungarian Central Bank, with low interest rates and a growth loan program.
As the OECD, which brings together the world’s most developed economies in addition to market analysts, is predicting significant growth for us, I am just reassuring everyone that we will no longer have any doubts after last year’s nightmare. We have every reason to be optimistic.
Title image: Aréna Pláza shopping mall in Budapest. (source: nepirockcastle.com)