The next few weeks will be quite eventful regarding forming expectations about Hungarian economy in 2024. Key personalities are giving speeches at current events, and statistical data is also expected soon. Here is a review of what has been revealed so far.
Forecast for 2024
At an event of the Hungarian Compliance Academy, Márton Nagy, the Minister of Economic Affairs talked about government measures against inflation throughout 2023. Inflation was highest in January 2023 at 25%, and it came back below 10% by October, and below 4% in January 2024. As a result, inflation is no longer a major concern regarding economic growth in Hungary.
Another major contributor to 2023 results was the surge in energy prices. The Hungarian government countered it with subsidies both to retail customers and to SMEs in energy intensive industries, a factory rescue program, and capping the price of electricity.
The Minister added that the twin deficits were cancelled, the trade balance was corrected, and the HUF / EUR exchange rate stabilized. At the same time, he lamented that the monetary policies held up by the Hungarian Central Bank (MNB) are too strict and the real interest rate at 6% is too high (next to a 9% base rate), which could negatively affect economic growth in Hungary.
At the same time, analysts expect the base rate to decrease steadily over the coming months, arriving below 7% by the summer, or even reach 6% in a best case scenario. The current HUF/EUR exchange rate around HUF 390 is realistic too.
Competitiveness and pandemic recovery
At the start-the-year event of the MKIK (Hungarian Chamber of Commerce), Minister of Economic Affairs Márton Nagy talked about a proposal for a set of measures intended to increase the competitiveness of Hungary. He said it would take 7-8 years to overcome all the negative impact of the COVID pandemic. He admitted that Hungarian economic growth in 2023 was below EU average, and summarized the most important challenges for 2024 as follows:
- increasing demand
- restarting internal economy
- maintaining high level of export activities
- increasing activity in the labor market
- reviving the credit market
Nagy also confirmed that Hungarian economy would need 500,000 more positions filled with workers. He mentioned 60% of this could be filled by Hungarians, which still leaves room for the import of foreign talent to Hungary.
Budget and taxes
In his speech, Minister of Finance Mihály Varga talked about Hungarian GDP, which was below expectations in 2023. He admitted that the originally intended general government deficit of 2.9% is unrealistic for 2024, and they expect 4.5% this year. They will aim for 3.7% in 2025, 2.9% in 2026, and 2.4% in 2027. He also made a mention of the importance of decreasing the debt-to-GDP ratio, which was 73% at the end of 2023.
Varga then talked about the importance of a competitive taxation system that is also digitally accessible. He said that thanks to the introduction of an automated VAT reporting system introduced this year (eÁFA, or e-VAT) companies might save up to 20% on administrative costs. They are also planning to introduce automatic reporting for receipts, and a new system to automate reporting related to payroll administration.
Investment and growth
László Parragh, chair of the Hungarian Chamber of Commerce said that Hungarian economy is producing solid results, but both productivity and efficiency needs improvement. He added that both companies and individuals have capital to spare, but they are too cautious when it comes to investment, which may be a hindering factor to economic growth.
According to Parragh, Hungarian economy should be restructured around the following pillars:
- Green investment
- Interest rates / loans that can sustain growth
- Sustaining growth, which is the responsibility of every economic operator
Room for improvement
The Hungarian Central Statistical Office has just released its summary about Hungarian GDP in Q4 2023. Both GDP and economic performance remain unchanged compared to the previous quarter, and shows a slight decrease compared to the previous year. 2023 GDP for Hungary was HUF 75,044 billion. At the same time, the government anticipates a GDP increase around 4% for 2024, while other experts suggest a more conservative estimate around 3%.
2023 was a very difficult year in many aspects. With the above mentioned measures and planned further improvements, 2024 will definitely be more successful for Hungarian economy.
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