Speaking at the Portfolio.hu Forint 2014 conference in Budapest, Minister for National Economy Mihály Varga said that the forint exchange rate can be considered optimal whenever it facilitates stable economic growth in Hungary. The Minister added that the Government has not set any specific exchange rate target.
The key objective of the country’s economic policy is to place Hungary on an economic growth path on which steady employment growth, a below 3 percent government budget deficit and a declining general government debt level can be maintained.
Mihály Varga stressed that the two key economic policy goals formulated by the government in 2010 have been achieved: employment has improved significantly and the debt levels of the state, local governments and the private sector have all decreased. Hungary also exited the Excessive Deficit Procedure, and compared to the economic status quo four years ago, the economy has become less vulnerable.
He pointed out that in the fourth quarter of last year GDP growth was already 2.7 percent, and with this figure Hungary is the first on the growth ranking of the Visegrád Four and the fifth on that of the EU 28. Mihály Varga called attention to the fact that growth has been driven not only by exports but by rebounding domestic demand and household consumption as well, which is important for SMEs producing for the domestic market. Full-year growth in 2013 was 1.1 percent, he added.
The number of those in employment, he continued, has exceeded 4 million. Although some of this growth does stem from the public work scheme, but the number of private sector employees has also increased over the past four years by more than 130 thousand.
Simultaneously, the number of unemployed people declined to 393 thousand, the unemployment rate is the lowest in five years, already below 9 percent. The Minister also stressed that some 6000 jobs have been created thanks to the Strategic Partnership Agreements concluded between the Government and large enterprises.
Mihály Varga emphasised that the volume of foreign trade was record-breaking. The volume of exports continued to exceed that of imports, thus foreign trade posted a record high surplus in 2013, due mainly to the performance of the industrial sector in general and the vehicle manufacturing division in particular.
Industrial output in 2013 increased by 1.4 percent, year-on-year. Growth has been driven by rebounding external demand, recent car industry capacity expansion and improved household consumption. Among the growth factors, vehicle manufacturing sector output soared spectacularly, by 19 percent, while the manufacturing sector of computer and optical products was down by 12.3 percent, the Minister said.
Construction sector output was up by some 10 percent last year, which growth figure resulted – in addition to the dynamic expansion of the sector – from investment revival. Government development projects, EU transfers and private sector projects have all actively contributed to investment growth, Mihály Varga stressed.
He stated that according to Eurostat data the construction sector of the EU 28 expanded on average by 0.8 percent in December 2013, year-on-year, while Hungary’s growth with more than 11 percent was the largest registered figure.
Mihály Varga added that domestic demand is improving along with the good export performance. Retail sales growth of some 3 percent registered in the fourth quarter confirms that household consumption has continued to rebound, owing to utility price cuts, the wage hikes for teachers and healthcare employees, real wage growth and improved consumer sentiment. Government measures such as the introduction of the childcare allowance extra, the extension of the scope of family tax allowance and the hiking of the minimum wage will further increase the disposable income of households, he pointed out.
On the consumption side of GDP, in Q4 2013 the real consumption of households was up by 1 percent in comparison to the corresponding period of the previous year.
In the last quarter of 2013, investment within the national economy soared by 14.9 percent year-on-year, the Minister said. Last year, the value of investment projects totalled HUF 4523bn, an increase of 7.2 percent compared to the previous year and investment activity within the manufacturing sector, the division of the largest weight, gathered speed: in Q4 2013, growth of 11.5 percent was recorded which brought full-year average growth to 4.9 percent.
Mihály Varga emphasised that 2013 was a year of trend reversal not only within the entire economy in general, but within the vehicle manufacturing sector as well. Vehicle manufacturing output exceeded by some 50 percent the level recorded one year ago, while it was up by some 20 percent for the entire year. Currently, 712 vehicle manufacturing enterprises are active in Hungary, with more than 115 thousand employees. This sector was also instrumental in boosting employment over the past years: the four large car manufacturers active in Hungary – Audi, Mercedes, Opel and Suzuki – employed 17 400 people in 2013 and created more than 2000 new jobs.
93 percent of the sales revenues of vehicle manufacturers come from exports, as the four-fifth of engines and 90 percent of cars produced in Hungary are exported. The Minister for National Economy added that the Government considers it a priority to support the extension of a Hungarian supplier network in the car industry.
Speaking about 2014 the Minister said that fiscal processes are in line with the Government’s expectations, the budget does not need to be reshaped.
(Ministry for National Economy)
