Hungary’s Economy Makes Positive U-Turn

  • 21 Aug 2013 9:00 AM
Hungary’s Economy Makes Positive U-Turn
As a result of the Government measures introduced over the past three years Hungary has begun a period of sustainable economic growth. With the early repayment of the IMF loan, Hungary has proven to be an economically independent country which can finance itself from the markets. This achievement is even more remarkable given the fact that during this process Hungary has succeeded in emerging from recession in a technical sense.

Minister of State for Taxation and Monetary Affairs Gábor Orbán announced that economic policy has been heading in the right direction, structural reforms are not needed – some comprehensive changes are about to be completed – and no structural modifications can be expected. Currently, the Government is focusing on maintaining a sustainable economic growth model. In Hungary, the number of people in employment has been increasing steadily and the purchasing power of wages has been preserved. Thanks to the Government policy aimed at easing the financial burden on households, it has been forty years since the inflation rate has been this low for this long.

Hungary also emerged from recession in a technical sense: in the second quarter of 2013, in line with analysts’ expectations, Hungary’s economy grew by 0.5 percent in comparison to the corresponding period of the previous year. Another key factor is expected to be the change in household consumption: the cutting of public utility tariffs and low inflation are anticipated to boost consumption.

The fact that compared to the same period of the previous year retail sales were up by 3.5 percent and 2.2 percent in April and May 2013, respectively, forecasts an increase for the entire year. The fact that the Job Protection Action Plan has assisted the employment of 730 thousand people with grim labour market prospects due to their age or other conditions in the first half of this year shows the success of this scheme. Among the employees subsidised by contribution allowances are 356 thousand people above the age of 55 years, 30 percent of the total (220 thousand people) work in unskilled jobs, 16 percent (115 thousand people) are under the age of 25 years, 4 percent (30 thousand people) are mothers with small children and 2 percent (11 thousand people) were long-term unemployed.

As a result of the Government objectives facilitating economic growth, Hungary has a growing number of positive economic indicators. In contrast to European trends, the number of those in employment has been steadily rising; in the second quarter of 2013 3 million 931 thousand people were in employment, up by 55 thousand compared to the level one year ago. According to statistics by the Hungarian Central Statistical Office (KSH), in Q2 2013 the employment rate among those aged 15-74 years was up by 0.9 percentage points compared to the same period of 2012, while in the 15-64 age bracket an improvement of 1.1 percentage points was registered.

The Government has also prioritised the issue of women’s employment, as a consequence of which the employment rate for women is at a 20-year peak after Hungary recorded the fourth largest increase in the EU within this field. In the 15-64 age group, 1 million 786 thousand women were in employment as the respective employment rate edged up by 0.2 percentage points to 52.4 percent. In Hungary, there were 190 thousand mothers with children under the age of 6 years last year, 15 thousand more than in the previous year and the highest figure since 2005.

Consistently improving industrial output is also anticipated to contribute to Hungary’s economic upturn. In light of data adjusted for workday effects, industrial production in June 2013 was up by 1.7 percentage points compared to the level of June 2012, while the respective figure increased by 1.2 percentage points in comparison to May.

Thus, Hungary has succeeded in concurrently establishing financial stability and putting the economy onto a path of positive growth.

Source: Ministry for National Economy

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