Restarting economic growth will be a major challenge for the coming year, according to Prime Minister Orbán. Hungary has been catching up at a significant pace in recent years, but this has been interrupted by the Russian-Ukrainian war and the energy crisis, exacerbated by sanctions, reports Magyar Nemzet.
While 2023 was the year of dismantling inflation, 2024 will be the year of restarting economic growth, Prime Minister Viktor Orbán said on Kossuth Radio the other day. The government expects that this year’s second-quarter contraction is the bottom of the negative economic cycle, with a turnaround already visible in the third and fourth quarters thanks to various measures.
As in many other parts of the world, the main economic challenges in Hungary have been international geopolitical tensions, energy supply uncertainties, soaring energy prices, accelerating inflation, and the increased deficit in the government sector during the COVID epidemic.
Despite all this, the past year has started quite well. Gross Domestic Product (GDP) volume expanded at a slower pace from quarter to quarter, but overall at a rate above the EU average (4.6%).
Csaba Lentner, professor at the National University of Public Service, stressed that
the Hungarian economy will bounce back to the level it was at between 2010 and 2019.
With the exception of drought-hit agriculture, all sectors contributed to economic growth last year. This year however, the agricultural sector could largely boost economic growth, as the weather has been extremely kind so far, and there is strong growth on a quarterly basis.
Industrial production received a significant boost from a rebound in vehicle production and electric battery production has been continuing to expand strongly, with several new plants announced recently. The performance of accommodation and hospitality, which had been the most affected during the COVID epidemic, now exceeded its pre-pandemic level, largely due to the increased inflow of foreign tourists.
Last year, consumer prices were on average 14.5 percent higher than in 2021, the highest inflation in 25 years.
This was partly driven by soaring energy prices, with imports of energy commodities rising 2.6 times year-on-year, which has significantly worsened the trade balance and been factored into the prices of many goods and services. In addition to the energy price explosion, the weakening forint, losses in agriculture, and buoyant domestic demand in the first half of last year also had a price pushing effect. Inflation, peaking at 25.7 percent in January, has become this year’s economic enemy number one.
FactThe government has put in place a series of measures that could result in single-digit inflation before the end of the year. Besides the online price monitoring system, mandatory promotions in shops have also been put in action recently. Until now, the latter measure meant a 10 percent discount on a certain range of products, but this rose to 15 percent from August 1. Furthermore, with the Széchenyi Recreation Card (SZÉP card, a fringe benefit within the framework of the cafeteria system that employees can receive from their employer) groceries can be purchased until the end of 2023.
The government is also boosting economic growth on several fronts, with next year’s budget already projecting an expansion of around four percent. However, there are risks that the Russia-Ukraine war is not over and the sanctions policy, affecting energy prices and security of supply, is ongoing.
Via Magyar Nemzet, Featured image via Facebook/Audi Hungária Győr