Hungary overview

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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 2019: 4.6%
Current EBRD forecast for Hungary’s real GDP growth in 2020: 3.1%

Investment acceleration and continuously strong household consumption have been the key drivers of the recent strong economic growth. Following the 5.1 per cent GDP growth rate in 2018, Hungary's economy continued to grow at a similar pace in the first half of 2019. Consumption was fuelled by strong nominal wage growth (above 10 per cent in annual terms) in both the private and public sectors. Salaries of employees in the central public administration were raised on average by 30 per cent from January 2019.
 
With such a strong start, growth for 2019 as a whole is expected to remain very solid at 4.6 per cent, notwithstanding concerns about the car industry in Germany, to which Hungary is vulnerable. In 2020, it is anticipated that GDP growth will moderate to 3.1 per cent. This slowdown will be partially offset by domestic demand, powered by a double-digit recovery in corporate credit and in wage hikes that remain strong. The latter is largely a result of the tightening labour market, caused by the fall in the working-age population and mounting skill-mismatches.
 
The absorption of EU funds will be likely to further underpin investment in 2019, but reduced EU fund inflows will create a drag on public investment from 2020 onwards. Trade disputes and the economic performance of Hungary’s main trading partners, such as Germany, are negative risks to that scenario.
 
 

 

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