Hungary overview


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 2018: 4.3%
Current EBRD forecast for Hungary’s real GDP growth in 2019: 3.3%

In the first half of 2018, economic expansion in Hungary accelerated further to 4.7 per cent year-on-year, fuelled by the continuously strong domestic demand and double-digit investment growth. Despite strong exports, the net contribution of trade has been negative, as the recovery in investment has required a major increase in imports. Following almost eight years of contraction, credit growth to the private sector started to recover in mid-2017.

In the first half of 2018, corporate credit grew by a healthy 10 per cent year-on-year. At the same time, household borrowing also went up, although by just 1.0 per cent year-on-year. The output gap is now fully closed and growth is expected to further remain above its potential and reach 4.3 per cent in 2018, before it slows down to 3.3 per cent in 2019. Strengthening credit to the private sector will further boost investment over the forecast horizon.

Household consumption will also remain strong, although a rise in inflation may somewhat offset the ongoing increase in disposable incomes. The shrinking labour supply and potential turmoil in global trade constitute the main risks to the outlook, especially in the automotive industry. The government’s gradual withdrawal from the public works scheme is expected to shift more workers towards the private sector, although more active labour market policies are required to bring more disabled, Roma and elderly people back to employment.

Hungary in the EBRD’s 2018-19 Transition Report

Hungary in the latest BEEPs survey