The growth of the Hungarian economy reached its peak in 2019. According to several economic predictions, the growth rate is expected to moderately decline in 2020, but it will still remain one of the highest among the member states of the European Union.
Recently, the Ministry of Finance has released its updated macroeconomic forecast, showing favorable economic developments.
According to the latest government forecast, the Hungarian economy will grow by 4.9% this year, which is higher than previously estimated and is consistent with various domestic and international expectations. The most important task of fiscal policy remains to bring the monetary conditions close to balance by the end of the government term, while the debt-to-GDP ratio is kept below 60%, according to a statement by the Ministry of Finance.
The ministry’s latest estimate is that economic growth is expected to reach 4.9% this year and 4% next year. Thereafter, GDP growth may remain above the EU average at around 4%. In addition, the debt ratio could fall below the Maastricht 60% threshold in the upcoming years.
The Hungarian National Bank (MNB) report released in September also predicts Hungary’s slowing growth, yet remains optimistic about its rate.
They expect GDP to grow by 4.5% this year, driven primarily by stronger corporate investment activity in line with a favorable financing environment. However, economic growth may have peaked in the first quarter of this year and in the absence of measures to improve competitiveness, economic development will be more moderate in the coming period, expected at around 3.3% in 2020-2021. The report adds that domestic demand continues to dominate the GDP increase.
In its November 2019 Regional Economic Outlook report for Europe, the International Monetary Fund (IMF) raised their earlier prediction of a 4.6% Hungarian GDP growth for 2019 and a 3.3% growth in 2020, as well as an inflation prediction of 3.4% for both years. According to IMF – at least in terms of GDP- we are not in a bad position compared to our regional competitors, but a significant slowdown due to the international environment is to be expected in 2020 nonetheless.
The European Commission’s most recent economic interim forecast is a bit less optimistic as they predict a 4.6% GDP growth in 2019 and only 2.8% in 2020 and 2021 respectively.
According to GKI Economic Research Co., the Hungarian GDP growth exceeded anyone’s forecast in 2019, however from 2020, a clear slowdown is expected, which is likely to continue until 2022. The reason for this among other things, is the disappearance of EU subsidies, the worst period of global economic recovery, and the only moderately competitive Hungarian economic model. Overall, GKI expects GDP growth of 4.3% for this year, 2.7% in 2020, and a 3.3% inflation for both years.
It is worth noting that for many years now it has been a trend that most people and institutes underestimated Hungarian GDP growth (including the government itself).