The Hungarian economy is back on a growth path where -- along with exports -- domestic demand and consumption have increasingly been driving economic expansion, Minister for National Economy Mihály Varga said on public service television programme “Az Este”. He added that this achievement can be attributed to several factors, such as public utility tariff cuts, family tax allowance as well as the wage hike of healthcare sector employees and teachers.

“In the third quarter economic growth was 1.8 percent. The Government had been expecting that provided this trend continued the indicator for the fourth quarter would come in above 2.5 percent, which eventually was 2.7 percent, and thus better than even the Government estimate,” he stated, speaking on television after the Hungarian Central Statistical Office (KSH) published GDP data.

As far as the entire year is concerned, economic growth was 1.1 percent, according to KSH’s first flash estimate. In comparison to the third quarter, in light of data adjusted for seasonal and calendar effects, GDP increased by 0.6 percent. In the first quarter of last year, quarter-on-quarter growth was 1.1 percent, 0.3 percent and 0.8 percent, respectively, in Q1, Q2 and Q3. In the previous year, economic output declined in every quarter in comparison to the preceding three months, accordingly, the Hungarian economy was in technical recession.

Minister Varga pointed out that among economic divisions the vehicle manufacturing sector was the best performer, while exports were also strong as demand on external markets have remained stable.

For the agricultural sector the year of 2012 was a very poor one, he stressed. “The sector performed well in 2013, a year of average weather conditions, while the construction sector recorded growth of 10 percent: this positive result stemmed not only from the Government’s renovation projects but also from the more active utilization of EU funding and rebounding private investments,” the Minister explained.

Three large-scale lending programmes aimed at assisting SMEs have been launched as of the summer of 2013: Eximbank’s export credit programme, the lending scheme of the Hungarian Development Bank focusing on supporting SMEs and the largest of these, the Funding for Growth Scheme of the National Bank of Hungary, Mr Varga recalled.

“Hardly any sector has been left where the Hungarian economy has not achieved better results than in 2010 or before the change of government,” the Minister said, adding that employment data published today by KSH have been the best since 1992: in Hungary 4 million 15 thousand people are in employment, a figure unseen for more than 20 years, he stressed. As the Minister underlined, the unemployment rate also decreased: while it was 12 percent in 2010, currently it is around 9 percent or – according to some calculations – even below that level.

It is another positive development, he pointed out, that economic growth is not causing imbalances, whereas formerly the economy’s meagre growth was fuelled by credit. “Debt is being repaid, we do not take out new loans and the economy has still remained on a balanced path: general government debt has been diminishing and the government budget deficit is below 3 percent,” Mr Varga said.

In the opinion of the Minister, the country is regaining the position it achieved in 2002-2003, “At that period the Hungarian economy belonged to the forerunners, after that it slipped to the group of tail-enders. After 2005-2006 the country has always the worst performer among the Visegrád Four, while currently we are among the top performers again,” he stated. As he emphasised, in the last quarter of 2013 the country achieved the fourth best growth figure within the EU member states.

Speaking about the forint exchange rate which exceeded 310 EUR/HUF, Mihály Varga said that forint depreciation is caused by external factors. “Hungary is considered to belong to emerging markets, and exchange rates in Poland, Turkey and South Africa deteriorated to a similar extent or even more following the announcement of Fed tapering. Another factor was that the base rate was cut significantly and the yields on government bonds are already much lower,” he said adding that after the positive data were published the forint has appreciated substantially. Mr Varga emphasised that for the time being a weaker forint has not caused major problems in the Hungarian economy and the state budget would also hold up and there is no need to amend it just because the exchange rate has changed, he stressed.

(Ministry of National Economy)