Shocking GDP data came: Hungary at 1996 level
Hungary’s economy contracted by an annual 2.4 percent in the second quarter, a first reading of data released by the Central Statistical Office (KSH) on Wednesday shows.
Adjusted for seasonal and calendar year effects, GDP shrank by 2.3 percent. KSH said industry and market-based services, mainly transport, warehousing and trade, contributed the most to the decline, while the drop was moderated by the performance of agriculture. Quarter on quarter, GDP eased by an adjusted 0.3 percent, falling for the fourth quarter in a row. According to index.hu, the last time that happened was in 1996 when Hungary was recovering after the shock of the 1990 change of the regime and the Socialist-Liberal Horn government introduced an austerity package cutting expenditures to deal with the unbalanced state budget.
Márton Nagy, Hungary’s economy minister, said in a statement that Q2 was the bottom of the recession and in Q3 and Q4 a quick increase is expected, index.hu wrote.
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Brussels, war are the reasons
Commenting on the data, the finance ministry said in a statement that the Hungarian economy would return to growth in the second half of the year and may do better than the EU average next year, notwithstanding the war in Ukraine and “Brussels sanctions”. “The economy’s fundamentals are stable,” the statement said, noting record employment and a jobless rate among lowest in the European Union. Further, it noted the strong performance in agriculture and foreign trade and falling inflation. Whereas Hungary, it added, had not received EU recovery funds owed to it, the economy was 4 percent above the pre-pandemic level, “while the EU average is 3.1 percent”.
The statement said the economy was weighed down by the European Commission’s refusal to release EU funds to the country. Even so, Hungary recorded 7.2 percent growth in 2021 and 4.6 percent growth in 2022, thereby outperforming the EU average from the pandemic baseline. The ministry pointed to higher real earnings and consumption, growth in industry and an improving foreign trade balance, all of which would boost the economy. Thanks to government measures, inflation is expected to fall to single digits before the end of the year, the statement said.
The economy will perform better
Meanwhile, the Hungarian investment rate, at 28 percent, “is currently the highest in the European Union”, it said. Minister of Economic Development Marton Nagy in a statement emphasised the link between the GDP data and the war in Ukraine and sanctions, which “caused a drop in consumption and a slowdown in investments”. Other external impacts included the stagnation of the German economy, he said.
But the Q2 figure, he added, represented “the bottom of the negative economic cycle” and the economy was set to return to growth swiftly in the third and fourth quarter. He noted an abundance of new foreign investments and a high jobs level of almost 4.8 million, as well as a robust vehicle and battery production and “soaring exports”. Nagy said the government aimed to avoid recession in the full year and targeted 4 percent growth in 2024.
The finger needs to be pointed straight in Orban’s ugly face. Fidesz holds dictatorial power in Hungary passing laws by decree now for three years. Fidesz and Orban have power, make all the decisions and policies and thus bear responsibility for the Hungarian economy. Inflation and interest rates are higher in Hungary than anywhere else in Europe because of Fidesz mismanagement. The single worse thing they did to put Hungary in this position was to go on a spending spree in the run up to the 2022 election to buy votes which created a huge deficit and juiced inflation higher. The Hungarian Central bank also kept interest rates artificially low pre-election to help the Fidesz campaign. The result is that a massive reversal upwards in interest rates took place post election choking the Hungarian economy. Hungarians are paying dearly for Fidesz short-term manipulation of the economy to win the election.
Darker days still are ahead of us.
Orban / Fidesz – ownership totally on them, the “pulverized” process have have “played out” on the Hungarian Economy, that see’s us as a country literally BROKE.
It will WORSEN.
Dishevelment/Disarray: Run for Prime Minister??!! The best helmsmen are ashore!!!!
How can you blame Brussels while the leadership here continues to think they are above the rule of law? It would take one pen stroke for Orban to fix the rule of law issue, but instead he and his men continue to play tough guy, when they are wrong! We may suffer, but I am sure Orban can easily retire to the millions dollars winery that his daughter now owns with her mystery money.
Your statement that “Hungary at 1996 level” is incorrect, and it is not what Index said. Rather, Index said, “This is the first time since 1996 that the gross domestic product has decreased in four consecutive quarters.” This has nothing to do with the actual level of GDP.