Brussels Anticipates Economic Growth in Hungary as Well
The European Bank for Reconstruction and Development (EBRD) has recently released its latest regional forecast, predicting a boost in economic growth across Europe’s emerging markets despite ongoing global geopolitical tensions.
Reports from Hungarian Nation and World Economy suggest that Hungary’s economic growth is set to align with the average of EU economies in Central Europe and the Baltic states for this year, surpassing it in the following year.
The EBRD anticipates GDP growth rates of 2.2 percent in 2024 and 3.1 percent in 2025 for the nine EU economies in Central Europe and the Baltic region. This growth can be attributed to the significant advancements made in these economies over the past two decades, largely a result of EU membership.
The European Commission also foresees positive economic changes in Hungary, with steady economic growth expected despite a contraction in GDP in 2023. The first quarter of 2024 witnessed a 0.8 percent expansion in economic activity, driven by robust growth in real incomes, a flexible labor market, and increases in pensions and minimum wages above inflation rates.
However, the European Commission warns of potential constraints on investment in 2024 due to fiscal consolidation efforts and commercial real estate overcapacity, with a rebound anticipated in 2025.
Exports in Hungary are projected to benefit from a recovery in global demand and ongoing foreign investment, though rising domestic demand may lead to an increase in imports, resulting in a current account balance deficit. Despite a rise in the unemployment rate in the first quarter of 2024, the labor market remains tight, with expectations of dynamic growth in real wages.
Inflationary pressures are likely to persist due to high wage growth and increased consumer demand. The European Commission predicts a decrease in inflation from 17 percent in 2023 to 4.1 percent in 2024 and 3.7 percent in 2025. However, uncertainties remain surrounding the economic outlook, particularly in relation to fiscal consolidation efforts and potential changes in private consumption and minimum wages.
The stronger-than-expected GDP data for the first quarter of 2024, as projected by both the EBRD and the European Commission, has surprised domestic analysts, who had forecasted lower growth. This growth is primarily attributed to an accelerating recovery in domestic consumption and investment.
Overall, the outlook for Hungary’s economy appears positive, with various factors contributing to its growth trajectory. It will be essential to monitor economic developments closely to adapt strategies and policies accordingly.
