Hungary set to outperform average EU GDP

According to a current report by economic and financial analysis firm ING, Hungary is poised to exceed the average EU GDP heading into 2020. At around 3.8% yearly growth compared to the EU’s 1.4%, this sets Hungary as one of the highest performing countries in the EU, though growth is predicted to slow as the next decade progresses.

The rapid current levels of growth are due to increases in labor market participation, which has recently approached full levels of employment. This trend has been steady since late 2013, which experts have put down to constant increases in wages and investment in training programs.

The Numbers

At the end of 2019, the unemployment rate in Hungary of 15-64 year-olds decreased by 0.2% to an all-time record low of 3.4%.

Playing the most significant part in this recent shift was an increasing level of employment with women, while men’s employment rates over the last year remained mostly unchanged.

The report also states that the structure of the labor market is one that should see some slowing within the next couple of years. This is because, overall, a much lower number of new workers joined the primary and fostered workforce over the last year period.

In the primary market, the workforce grew by 84.5k over the last year to around 4.3 million. While still a large addition, this is a sizeable reduction compare to increases in the previous few years. Similarly, the number of fostered workers, that is those in low skilled and state-financed jobs, also dropped in 2019.

Economists speculate that these numbers, combined with the fact that almost 36% of the 155k unemployed have been looking for work for over a year, signifies that Hungary is approaching a potentially serious discrepancy within the labor market.

As for the real contributions to GDP, these are closely tied with Hungary’s existing largest industrial sectors. This means mining and steel, chemical, and automobile production rank as the biggest contributors. It should also be noted that the technology sector has been showing continual expansion since 2010, with an average annual growth of just over 6%, so it’s definitely an area to watch.

What Does This Mean?

A stronger economy means confidence in Hungary’s markets and businesses is approaching an all-time high. Those who invested previously in the Forint have enjoyed an increase in value over the last seven years, but this is far from the only potential line of investment.

With the latest news of GDP growth, many additional investors are also jumping on board. While the dividends of new investors are expected to be smaller than those who have been involved for years, current trajectories still paint this as a worthwhile pursuit.

In terms of businesses moving from other locations into Hungary, this is a likely outcome for a few, but it shouldn’t prove a reliable pattern.

Due to similarly strong GDP growth of the countries surrounding Hungary, movement over the border will be uncommon, with the worst-performing GDP nations like Spain, Italy, and Greece being too far for such a move to make financial sense.

Immigration, on the other hand, is expected to see a rise in Hungary over the next few years. Reliable growth and a high standard of living make it an attractive destination for skilled labor, from neighboring countries and far beyond.

Questions Going Forward

The biggest question-mark for Hungary at this point is the same for many others in the EU: the matter of Brexit.

With the UK rapidly pivoting between a deal and no-deal agreement, the short- and long-term ramifications remain in question.

That said, despite wavering levels of uncertainty over the past two or three years, the pound has remained remarkably stable. To discover whether that makes the Forint/GBP combination as good an investment as EUR/GBP, a good place to start would be to find a place for getting currency pairs explained by brokers who have high reputations and long years of experience, proving their worth when it comes to making such decisions.

In the event of a no-deal Brexit, there will undoubtedly be a decrease in tourism originating from the UK. Without free movement, this added complexity may prove a hindrance, though the degree this could play on Hungary’s overall tourism trade should at least prove minimal. In terms of trade, the effect of Brexit should also prove minimal, as the UK accounts for less than 5% of Hungary’s yearly trade.

With growth only just beginning to slow, it’s unknown how drastically Hungary’s GDP could be affected within the next few years. At any rate, it should still be placed over the EU average until the mid-2020s at least. With increased confidence and more eyes of this corner of the EU than ever before, Hungary’s performance on an international scale should remain strong for some time.