In the second half of 2013, some encouraging signs have emerged within the Hungarian economy that have been confirmed by recently published preliminary and detailed GDP data for the first quarter of 2014. Hungary’s GDP increased by 3.5 percent in Q1 2014 compared to the corresponding period of the previous year. In international comparison, Hungary’s 1.1 percent quarter-on-quarter growth was – along with Poland’s – the highest within the European Union. The main forward-looking indicators are also signalling that the expectations of domestic market participants are positive: the economic sentiment index of the Hungarian Development Bank (MFB) has reached a new record with several sub-indices jumping to all-time highs, while the Purchasing Manager Index of the Hungarian Association of Logistics, Purchasing and Inventory Management (HALPIM) continues to indicate the firm future expansion of the sector.
As far as investment in Hungary is concerned, post-crisis years had been characterized by diminishing investment volume. This trend was reversed in 2013 when year-on-year growth of 7.2 percent was recorded. Within that, the investment volume of machinery and equipment gained 8.5 percent, while that of the construction sector was up by 5.9 percent. In 2013, business environment also had a favourable impact on the decisions of enterprises: improved lending and the speed-up of the utilization of EU funds have both contributed to the positive U-turn in the propensity of the private sector to invest.
In light of preliminary data, the pace of Hungarian economic growth gained momentum in Q1 2014. In January-March 2014, GDP was up by 3.5 percent in comparison to the corresponding period of the previous year, an unprecedented increase since 2006. Data for Q3 and Q4 2013 were already above prior expectations, but this year’s first quarter figure significantly exceeded the 2.7 percent growth forecast of analysts. In light of first quarter GDP data, it can be reasonably expected that for the entire year of 2014 GDP growth will be above the 2.3 percent estimate prognosticated by the Government.
Following an increase of 8.1 percent in February 2014, industrial output was up by 10.6 percent year-on-year in March 2014 which has been unprecedented since February 2011.
The Spring Forecast of the European Commission contains economic projections which are similar to those in the macroeconomic outlook of the Convergence Programme. This confirms that the Hungarian Government’s forecast is reliable and trustworthy. The majority of data published by the Commission are better than those in the Winter Forecast 2014.
In February, the number of tourism nights at hotels was up significantly: demand by domestic and foreign guests increased by 12 percent and 9.2 percent, respectively, in comparison to the corresponding period of the previous year. In addition to domestic consumption growth, the positive figures have been the result of favourable weather conditions and the increasing popularity of SZÉP Card.
Industrial output in Hungary was again significantly higher in the second month of the year, and thus the upward trend in place since 2013 is continuing. In February 2014, industrial output volume index was up by 8.1 percent – according to both unadjusted and workday-adjusted data – in comparison to the corresponding period of 2013. This figure is the best in three years, as it has been the fastest February growth registered since the same period in 2011.
In the first month of 2014, foreign trade posted a surplus of EUR 482 million, up by EUR 209 million compared to January 2013 and higher than the figure published in the preliminary report. In January, the volume of exports and imports increased by 6.1 percent and 3.6 percent, respectively. According to the latest preliminary data published by the Hungarian Central Statistical Office (KSH), in February 2014 the surplus of foreign trade totalled some EUR 766 million.
According to the Hungarian Central Statistical Office (KSH), positive employment and unemployment trends have continued. In the period December 2013-February 2014, the number of people aged 15-74 years in employment increased from 3 million 817 thousand one year ago to 4 million 53 thousand, up by 236 thousand and reaching another 22-year record high.
According to the latest data, in March 2014 the seasonally adjusted GKI-Erste economic sentiment index continued to improve. In light of the survey conducted by GKI Economic Research, the economic sentiment index edged higher to -0.7 points in March, the best figure in over ten years: a better reading was last seen in August 2002. This favourable piece of data confirms the positive trend which has been in place since the first months of 2013.