Hungary Economic Forecast

Hungary Economic Outlook

July 31, 2018

Available data for Q2 points to another quarter of strong growth. This follows a remarkable economic performance in the first quarter on the back of buoyant domestic demand. Extremely tight labor market conditions and improved consumer sentiment seem to have buttressed household spending, as shown by surging retail sales in the first two months of the quarter. Construction activity also continued to climb in both April and May, supported by the rise in real estate prices, while growth in industrial production regained some steam after decelerating throughout Q1. Moreover, upbeat business confidence throughout Q2 suggests fixed investment remained quite strong. In the political arena, however, relations between Hungary and EU institutions continue to sour. In mid-July the European Commission decided to refer the country to the European Court of Justice after the government passed a law that threatens to criminalize some forms of support to undocumented migrants.

Hungary Economic Growth

Private consumption is set to remain buoyant this year, supported by robust wage hikes, a tight labor market and rising consumer confidence. Additionally, fixed investment should continue to soar, benefiting from strong inflows of EU funds, still-low interest rates and lower corporate taxes. On the other hand, weaker demand from the Eurozone will weigh on export growth; nevertheless, the current account will remain firmly in surplus. The main downside risks stem from potential capital outflows due to the Fed’s tightening cycle and the introduction of tariffs on car imports from the EU by the U.S. FocusEconomics panelists see the economy expanding 4.0% in 2018, up 0.1 percentage points from last month, and 3.1% in 2019.

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Hungary Facts

ValueChangeDate
Bond Yield3.530.0 %Aug 15
Exchange Rate285.9-0.68 %Aug 15
Stock Market35,8260.04 %Aug 15

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