Hungary Economic Forecast

Hungary Economic Outlook

October 2, 2018

The economy continued to fire on all cylinders in the second quarter, as an extremely tight labor market and robust wage growth spurred consumer spending, while rising EU funds buttressed fixed investment. Q2’s drivers of growth likely remained in place in the third quarter: In July, retail sales continued to soar, underpinned by significant wage growth and an extremely low unemployment rate; industrial production growth accelerated; and construction output surged for the second consecutive month, probably benefiting from the government pre-financing of EU-funded projects. In the political arena, on 12 September, the European Parliament voted to trigger Article 7 of the EU treaty against Hungary on the grounds that Prime Minister Viktor Orban’s government was undermining civil rights, democracy and the rule of law in the country. The procedure could lead to sanctions including the suspension of Hungary’s EU Council voting rights, although most analysts see this as unlikely considering it would require unanimous support from all other EU members. Orban, backed by a relatively high approval rating, announced it will contest the vote at the European Court of Justice.

Hungary Economic Growth

Growth is set to slow but remain robust next year, boosted by resilient domestic demand. Moderating wage increases will lead to some softening in consumer spending growth, while fixed investment should continue to expand at a healthy but slower pace due to rising interest rates. The main downside risks stem from capital outflows resulting from the Fed’s tightening cycle and shrinking EU funding following European Commission reports of financial irregularities. Met the why particular panelists see the economy expanding 4.2% in 2018 and 3.2% in 2019, up 0.1 percentage points from last month’s forecast.

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Hungary Facts

ValueChangeDate
Bond Yield3.990.0 %Oct 12
Exchange Rate280.3-0.68 %Oct 12
Stock Market36,3480.04 %Oct 12

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