Recession over in Hungary? New GDP data out

Hungarian GDP grew by 0.9% in the third quarter compared to the previous quarter. The economy contracted by 0.4 percent year on year, based on unadjusted data, the Central Statistical Office (KSH) said on Tuesday.

Seasonally and calendar-adjusted data show it decreased by an annual 0.3 percent.

In the Q1-Q3 period, GDP contracted by 1.2 percent year on year.

Economy-macroeconomics

Márton Nagy, the economic development minister, said after the KSH release that restoring economic growth was “the next big task” after having curbed inflation.

The ministry statement said that the economy began growing again in the third quarter, adding that Hungarian growth had outperformed most other EU member states in the quarter.

He said the war in Ukraine and associated sanctions, as well as “profiteering by multinationals”, had battered the economy, businesses and families.

Although quarterly growth was positive, the economy contracted on annual basis, he noted, adding that the government still had work to do. Nagy referred to state-backed targeted loans under various schemes worth the equivalent of up to 1.5 percent of GDP, as well as the Factory Rescue scheme which subsidises energy-intensive businesses and frees companies from unfavourable energy contracts, among other measures.

He said a pick-up in consumer demand was expected and this would contribute to further growth. Real wages were likely to grow again from September, with a 4-5 percent increase next year, his statement said.

Talks on next year’s minimum wage between employers and employees will continue this week, with possible increases as early as this December, he noted.

One obstacle to growth recovery, he said, was high interest rates on the back of the central bank’s base rate exceeding inflation. This, he added, put a drag on consumption and deterred entrepreneurs from investing and developing, so damaging competitiveness and growth.

The economic development ministry, Nagy noted, has drafted a 10-point proposal in order to further increase employment and GDP and further strengthen competitiveness, with a goal for manufacturing to account for 30 percent of GDP by 2030 and the logistics sector to make up 10 percent. By that time, Hungary will have reached 90 percent of the EU level of development, Nagy said in his statement.

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