August 3, 201
Hungary has achieved several years of strong growth. This expansion has been largely supported by accelerated absorption of EU funds and strong disposable income.
", "publishDate": "2018-08-03", "sections": [ { "heading": "Overall assessment and context", "content": "- Hungary has achieved several years of strong growth supported by accelerated absorption of EU funds and strong disposable income.\n- External debt declined substantially over the past few years and public debt also declined, albeit at a much slower pace.\n- The increase in domestic demand has moderated the external current account surplus from its 2016 record level, and the exchange rate has recently depreciated.\n- Headline inflation has started to pick up, mainly due to higher energy prices; core inflation has been running sideways over the past six months despite emerging capacity constraints.\n- Unemployment remains on a decreasing trend and labor shortages are intensifying despite improvement in participation rates." }, { "heading": "Economic outlook and projections", "content": "- GDP growth:\n - 2018: expected to be around 4 percent, similar to last year.\n - 2019: growth will start to decelerate as absorption of EU funds tapers off and capacity constraints tighten further.\n- Inflation:\n - Inflation is projected to slightly exceed the MNB’s 3 percent inflation target.\n- Staff projects the 2018 overall fiscal deficit at about 2.4 percent of GDP, in line with the budget’s target.\n- In view of the strong cyclical position, the structural primary balance is expected to deteriorate by close to one percent of potential GDP." }, { "heading": "Fiscal developments and risks", "content": "- 2017 general government fiscal deficit narrowed to 2 percent of GDP, compared to the budgeted 2.4 percent.\n- The structural primary balance deteriorated by about 1.2 percent of potential GDP in 2017.\n- Public debt ratio has come down only to a limited extent despite favorable fiscal outcomes.\n- Executive Board view: expedite reversal of the pro-cyclical fiscal stance and reduce public debt to create policy space against shocks.\n- Recommended fiscal measures:\n - Phase out the remaining sectoral taxes.\n - Broaden the tax base and further enhance tax administration to reduce distortions and boost revenue collection.\n - Transform existing property taxes into a modern real estate tax to help local governments raise additional revenue for healthcare, education, and infrastructure while protecting the vulnerable.\n - Reform public administration to reduce the wage bill, facilitate a competitive public salaries scale, and improve provision and quality of public services.\n - Reduce spending on goods and services where possible.\n - Eliminate generalized subsidies and protect the poor via targeted measures." }, { "heading": "Monetary policy and financial conditions", "content": "- The Magyar Nemzeti Bank (MNB) further relaxed its monetary stance during 2017 and in early 2018, mostly using unconventional tools.\n- Imported inflation has been low; large wage increases have been mitigated by lowering social security contributions.\n- The MNB intends to let the Market-Based Lending Scheme expire by end-2018, as originally scheduled.\n- Guidance:\n - Once inflation sustainably approaches the upper half of the tolerance band (3±1 percent), monetary policy stimulus should be gradually scaled back.\n - Removal of monetary accommodation should start with unconventional measures.\n - Recent MNB communication emphasizing commitment to the inflation target and openness to take any action to achieve it is welcomed." }, { "heading": "External position, competitiveness, and structural issues", "content": "- Hungary’s external position is broadly in line with medium-term fundamentals and desirable policies.\n- Hungary’s IIP has improved in recent years and international reserves are adequate according to the Fund’s metric.\n- Non-price indicators point to the need to improve productivity and competitiveness.\n- Structural priorities:\n - Continue reforms to improve the business environment, including addressing challenges in obtaining construction permits and electricity connection, ease of paying taxes, and perceived corruption.\n - Level the playing field for all investors, including SMEs and FDI, by reducing red tape and simplifying the regulatory environment to broaden the growth and export base.\n - Urgently improve education and vocational training to address skills mismatches.\n - Continue to reduce the number of participants in public works schemes to release them to the primary labor market.\n - Increase availability of child-care facilities to improve labor market participation, especially among women.\n - Establishment of the Competitiveness Council and implementation of some of its recommendations are welcomed." }, { "heading": "Selected economic indicators (2013–19, exact figures as reported)", "content": "- Real GDP (percentage change):\n - 2013: 2.1\n - 2014: 4.2\n - 2015: 3.4\n - 2016: 2.2\n - 2017: 4.0\n - 2018 (Prelim./Proj.): 3.3\n - 2019 (Proj.): [value not provided in table]\n- Total domestic demand (contribution to growth):\n - 2013: 5.1\n - 2014: 1.1\n - 2015: 1.5\n - 2016: 5.4\n - 2017: 3.2\n- Private consumption (contribution to growth):\n - 2013: 0.3\n - 2014: 2.0\n - 2015: 2.3\n - 2016: 2.5\n - 2017: 2.4\n- Gross fixed capital formation (percent of GDP):\n - 2013: 20.9\n - 2014: 22.2\n - 2015: 21.9\n - 2016: 19.2\n - 2017: 21.5\n - 2018 (Prelim./Proj.): 23.1\n - 2019 (Proj.): 23.3\n- Gross national saving (percent of GDP, from BOP):\n - 2013: 24.7\n - 2014: 23.7\n - 2015: 25.4\n - 2016: 25.3\n - 2017: 25.2\n- General government overall balance (percent of GDP):\n - 2013: -2.6\n - 2014: -1.9\n - 2015: -1.7\n - 2016: -2.0\n - 2017: -2.4\n - 2018 (Proj.): [about] 2.4 percent of GDP (staff projection)\n- Primary balance:\n - 2013: 1.6\n - 2014: 0.8\n- Primary structural balance (percent of potential GDP):\n - 2013: 3.6\n - 2014: -0.3\n - 2015: -0.5\n- Public debt (percent of GDP):\n - 2013: 77.1\n - 2014: 76.6\n - 2015: 76.7\n - 2016: 76.0\n - 2017: 73.6\n - 2018 (Prelim./Proj.): 71.3\n - 2019 (Proj.): 69.1\n- Broad money (end-of-period growth):\n - 2014: 5.5\n - 2015: 6.3\n - 2016: 7.0\n - 2017: 6.2\n- Lending to the private sector, flow-based 2/:\n - 2015: -3.3\n - 2016: -11.0\n - 2017: 6.4\n - 2018 (end-of-period/data at end-June): 7.2 (note: table shows 7.2 then 6.5 in sequence)\n- T-bill (90-day, average) and Government bond yield (5-year, average):\n - Government bond yield (5-year, average): 5.2 (2013), 3.9 (2014), 2.7 (2015)\n- Current account (percent of GDP):\n - 2013: 3.8\n - 2014: 3.5\n - 2015: 6.0\n- Reserves (billions of Euros):\n - 2013: 33.8\n - 2014: 34.6\n - 2015: 30.3\n - 2016: 24.4\n - 2017: 23.4\n - 2018 (Prelim./Proj.): 26.9\n - 2019 (Proj.): 30.1\n- Gross external debt (percent of GDP):\n - 2013: 117.8\n - 2014: 114.7\n - 2015: 107.7\n - 2016: 97.2\n - 2017: 84.6\n - 2018 (Prelim./Proj.): 76.2\n - 2019 (Proj.): 70.7\n- Gross official reserves (percent of short-term debt at remaining maturity):\n - 2013: 119.4\n - 2014: 160.6\n - 2015: 139.5\n - 2016: 131.1\n - 2017: 139.9\n - 2018 (Prelim./Proj.): 165.3\n - 2019 (Proj.): 174.0\n- Exchange regime: Floating\n- Exchange rate, HUF per euro, period average:\n - 2013: 297\n - 2014: 309\n - 2015: 310\n - 2016: 311\n - 2017: 329\n- Nominal effective rate (2000=100, average):\n - 2013: 110.3\n - 2014: 114.2\n - 2015: 116.5\n - 2016: 116.7\n - 2017: 115.5\n - 2018 (Prelim./Proj.): 117.9\n- Real effective rate, CPI basis (2000=100, average):\n - 2013: 74.3\n - 2014: 77.7\n - 2015: 79.5\n - 2016: 79.6\n - 2017: 78.2\n - 2018 (Prelim./Proj.): 78.7\n- Quota at the Fund: SDR 1,940 million\n- Memorandum items:\n - Nominal GDP (billions of Forints): 2013: 30,247; 2014: 32,592; 2015: 34,324; 2016: 35,420; 2017: 38,183; 2018 (Prelim./Proj.): 40,823; 2019 (Proj.): 43,435\n - Per capita GDP (EUR): 2013: 10,277; 2014: 10,691; 2015: 11,238; 2016: 11,568; 2017: 12,600; 2018 (Prelim./Proj.): 13,449; 2019 (Proj.): 14,286\n\nIMF Press Release No. 18/328 — August 3, 2018\n\n---\n\n\n References\n\n- Hungary and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2018/08/03/pr18328-hungary-imf-executive-board-concludes-article-iv-consultation" } ], "bullets": [ "[Markdown version](/en/news/articles/2018/08/03/pr18328-hungary-imf-executive-board-concludes-article-iv-consultation/index.md)", "[Structured JSON version](/en/news/articles/2018/08/03/pr18328-hungary-imf-executive-board-concludes-article-iv-consultation/index.json)", "[Bundle manifest](/en/news/articles/2018/08/03/pr18328-hungary-imf-executive-board-concludes-article-iv-consultation/bundle-manifest.json)", "Published: August 3, 2018", "Hungary has achieved several years of strong growth supported by accelerated absorption of EU funds and strong disposable income.", "External debt declined substantially over the past few years and public debt also declined, albeit at a much slower pace.", "The increase in domestic demand has moderated the external current account surplus from its 2016 record level, and the exchange rate has recently depreciated.", "Headline inflation has started to pick up, mainly due to higher energy prices; core inflation has been running sideways over the past six months despite emerging capacity constraints.", "Unemployment remains on a decreasing trend and labor shortages are intensifying despite improvement in participation rates.", "GDP growth:", "Inflation:", "Staff projects the 2018 overall fiscal deficit at about 2.4 percent of GDP, in line with the budget’s target.", "In view of the strong cyclical position, the structural primary balance is expected to deteriorate by close to one percent of potential GDP.", "2017 general government fiscal deficit narrowed to 2 percent of GDP, compared to the budgeted 2.4 percent.", "The structural primary balance deteriorated by about 1.2 percent of potential GDP in 2017.", "Public debt ratio has come down only to a limited extent despite favorable fiscal outcomes.", "Executive Board view: expedite reversal of the pro-cyclical fiscal stance and reduce public debt to create policy space against shocks.", "Recommended fiscal measures:", "The Magyar Nemzeti Bank (MNB) further relaxed its monetary stance during 2017 and in early 2018, mostly using unconventional tools.", "Imported inflation has been low; large wage increases have been mitigated by lowering social security contributions.", "The MNB intends to let the Market-Based Lending Scheme expire by end-2018, as originally scheduled.", "Guidance:", "Hungary’s external position is broadly in line with medium-term fundamentals and desirable policies.", "Hungary’s IIP has improved in recent years and international reserves are adequate according to the Fund’s metric.", "Non-price indicators point to the need to improve productivity and competitiveness.", "Structural priorities:", "Real GDP (percentage change):", "Total domestic demand (contribution to growth):", "Private consumption (contribution to growth):", "Gross fixed capital formation (percent of GDP):", "Gross national saving (percent of GDP, from BOP):", "General government overall balance (percent of GDP):", "Primary balance:", "Primary structural balance (percent of potential GDP):", "Public debt (percent of GDP):", "Broad money (end-of-period growth):", "Lending to the private sector, flow-based 2/:", "T-bill (90-day, average) and Government bond yield (5-year, average):", "Current account (percent of GDP):", "Reserves (billions of Euros):", "Gross external debt (percent of GDP):", "Gross official reserves (percent of short-term debt at remaining maturity):", "Exchange regime: Floating", "Exchange rate, HUF per euro, period average:", "Nominal effective rate (2000=100, average):", "Real effective rate, CPI basis (2000=100, average):", "Quota at the Fund: SDR 1,940 million", "Memorandum items:", "[Hungary and the IMF](http://www.imf.org/external/country/HUN/index.htm)", "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)", "[Press Releases](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2018/08/03/pr18328-hungary-imf-executive-board-concludes-article-iv-consultation/index.md", "json": "/en/news/articles/2018/08/03/pr18328-hungary-imf-executive-board-concludes-article-iv-consultation/index.json", "bundleManifest": "/en/news/articles/2018/08/03/pr18328-hungary-imf-executive-board-concludes-article-iv-consultation/bundle-manifest.json" }, "generatedAtUtc": "2026-09-25T22:08:42.659Z" }