In Q1 2014, the Hungarian economy posted a significant increase, registering the best GDP growth figure since 2006. According to preliminary data, GDP was up by 3.5 percent year-on-year and 1.1 percent quarter-on-quarter. The data published earlier today are well above analysts’ expectations of 2.7 percent.

Although international statistics are to be published only at noon today, in light of preliminary information the Hungarian figures place the country among the top performers within the European Union and the region.

Productive sectors continued to be the main contributors fuelling the outstanding rebound, as both the industrial and the construction sectors expanded remarkably. In addition to these, the services sector also underpinned growth. Higher services demand and consumption were the drivers of strengthening sales. Favourable tourism data lifted the hotel and catering sector, while the increase of industrial output had a positive effect on the transportation sector. The lending schemes of Eximbank and the National Bank of Hungary significantly improved the performance of the long-suffering financial sector.

Growth that has re-emerged over the past two quarters is more and more indicating that the economy’ structure is increasingly balanced and sound. This is also confirmed by the fact that the increase in domestic demand has joined soaring exports as a significant growth factor. It has to be noted that parallel to accelerating growth, other key indicators have improved further: the current account shows a massive surplus and general government debt remains below 3 percent.

Household consumption growth, one of the factors behind the impressive increase, was bolstered -- besides favourable inflationary processes and employment growth -- by the increase of wages in real terms. Another positive phenomenon is the revival of investment thanks mainly to rebounding private sector activity and the speeding-up of the utilization of EU resources.

Economic expansion also buoyed the labour market, as the number of people in employment increased further and over the past one year 260 thousand more people have been given work. The private sector has been increasingly contributing to positive labour market trends. Economic growth in turn results in wage increases which in the future boost household consumption.

As a whole, data from the first quarter confirm that the Hungarian economy has entered a sound and sustainable path. In light of better-than-expected first quarter data Hungarian economic growth in 2014 exceeds by 0.3-0.6 percentage points the 2.3 percent GDP growth figure prognosticated by the Convergence Programme. These optimistic expectations are based on the stock of orders data within the industrial and the construction sector, the gradual improvement in business confidence as well as the upturn in investment.

(Ministry for National Economy)