Hungary overview

Tram

In Hungary we focus on:

Strengthening banking sector resilience and the capacity to lend. To the extent that the measures agreed under the 2015 Memorandum of Understanding are consistently implemented, the Bank will be able to support the financial sector in areas such as privatisation and will also support sector consolidation and seek to help banks by providing long term funding on sustainable and commercial terms. The Bank will also continue its cooperation to enhance the framework in support of NPL resolution.

Improving further Hungary’s energy security through strengthening market based regional interconnections, optimising the use of storage capacities and enhancing energy efficiency. The Bank will seek a role in supporting key energy infrastructure projects, including commercial gas interconnections to facilitate the two-way flow of gas and to develop a Hungarian gas exchange. With regard to energy efficiency, significant challenges remain and consequently the potential exists for the Bank to be actively involved in energy savings projects.

Enhancing competitiveness and addressing innovation gaps. The EBRD will support local companies in catching up to the technological frontier, directly and through private equity channels, and will also help them become more competitive. The Bank will pay particular attention to companies operating in the less developed regions. It will also look to build more commercial and competitive market structures in targeted sectors, such as municipal and inter-city transport, to address inefficiencies, insufficient private sector participation and the need for restructuring.

The EBRD’s latest strategy for Hungary was adopted on 23 March 2016
 
 

Current EBRD forecast for Hungary’s real GDP growth in 2017: 3.8%
Current EBRD forecast for Hungary’s real GDP growth in 2018: 3.4%

In Hungary, GDP growth slowed to 2.2 per cent in 2016 as investment collapsed by 11 per cent, mostly explained by the low utilisation of EU funds. In contrast, private consumption remained strong, underpinned by rising employment and wages. Household disposable incomes were driven by rising real wages and falling unemployment.
 
In the first half of 2017, GDP growth accelerated to 3.6 per cent year-on-year, driven by a solid rebound in public investment and robust private consumption. Investment is up by 24 per cent year-on-year in the first half of 2017, backed by accelerated EU fund transfers as well as a return to positive credit growth (after seven years of negative credit growth) to the private sector. Accelerated EU funds absorption and recovering credit to the private sector are set to support growth over the short term.
 
The expected increases in wages, driven by agreements with the state-owned companies and car manufacturers, a higher minimum wage and social security contribution cuts will all further support strong consumption, despite rising inflation. On balance, GDP growth is expected to accelerate to 3.8 this year and to 3.4 per cent in 2018.

Hungary in the EBRD’s 2017-18 Transition Report

Hungary in the latest BEEPs survey