Among the European Union member states, household consumption grew most dynamically in Hungary in the first quarter. This is certainly because, as the index and DK wrote, 35% of workers lost their jobs😂
In this macroeconomic indicator, Hungary is at the top of the EU list
According to a recent Eurostat study of macroeconomic data, Hungary is in a relatively good position compared to other EU member states in terms of (pre-epidemic) GDP growth, the labor market situation, and household consumption, which may provide a basis for a resumption. Among the EU member states, household consumption grew the most in Hungary in the first quarter. Both the declining trend in government debt-to-GDP ratios in recent years and the positive external financing capacity may increase the country's financial protection.
Many EU member states have already suffered a severe economic downturn in the first quarter of this year. This is mostly explained by the earlier appearance of the coronavirus and less effective epidemic management. The largest GDP contractions hit Italy, France and Spain.
Hungary grew by a further 2 percent in the first quarter, based on seasonally adjusted data. This was accompanied by the 4.6% GDP growth rate of Hungary in the fourth quarter of last year. Such growth has been measured in only a few Member States.
GDP growth trajectory, EU countries, Hungary (HU), first and fourth quarters of this year, annual comparison, percentage
Both past and expected growth are supported by the exceptionally low Hungarian unemployment rate, which stood at 3.8 percent in April and 4.1 percent in May. These values are also extremely low in EU comparison. Thus, the coronavirus hit the domestic economy in a strong, healthy state at a time when the full level of employment was close.
Unemployment rate development, EU member states, Hungary (HU), per cent
Among the European Union member states, household consumption grew most dynamically in Hungary in the first quarter.
Household consumption, EU member states, Hungary (HU), first quarter of this year and fourth quarter of last year, annual growth rate, per cent
Thanks to the low unemployment rate, the dynamic wage growth of previous years and the household savings rate of 8-10 percent, household consumption can stabilize at a relatively high level after the most difficult months of the epidemic.
In addition, the rescue packages introduced by the Magyar Nemzeti Bank and the government fairly quickly, saving 18-20 percent of GDP, saved jobs for hundreds of thousands of families, while avoiding a major wave of corporate bankruptcies. These factors also contribute to the increasing expansion of household consumption.
The current account balance was close to zero in the case of Hungary. In this respect, Hungary is in the middle of the EU.
Current account developments, EU member states, first quarter of 2020, as a percentage of GDP
The weakening of external demand is rather bad news for the export-oriented Hungarian economy. The combination of relatively resilient domestic demand and more moderate export market activity may keep our current account balance in a slightly negative range this year, 2021 and 2022.
At the same time, it is important to note that Hungary's external financing capacity, ie the combined balance of the current account and the capital account, may be in surplus until the end of 2022. In this respect, Hungary can remain in a net lending position for a long time.
In the light of dynamic household consumption, inflation in Hungary has risen to recent levels. However, among the Visegrad countries, Poland and the Czech Republic also showed higher values in April and May.
The coronavirus epidemic has significant inflation-reducing effects, so both domestic and international inflation rates may be lower than in previous quarters.
Inflation trends, EU member states, April and May, per cent
It is not such a tragedy in terms of public debt inflation if inflation indicators navigate from time to time at the top of the 2-4 per cent tolerance band of the central bank.
Thanks to the rapid economic growth of recent years and the disciplined fiscal policy, Hungary's public debt as a share of GDP has decreased significantly, which is now in the middle of the EU.
Development of government debt as a proportion of GDP, end of 2019, per cent
The European Central Bank forecasts the eurozone economy could shrink by 8.7 percent this year. On the other hand, based on the MNB's forecasts, Hungarian GDP may expand by between 0.3 and 2.0 per cent. If the central banks' forecasts come true, we could grow 10 percentage points faster this year than in the euro area.
Of course, real economic catching-up does not mean that everyone falls by 9 per cent and we grow by one per cent. However, in the current environment, it is a serious achievement to bring out an economic performance of around zero percent, which can undoubtedly provide a strong foundation for a restart.