Household consumption likely to remain key growth driver of Hungarian economy in 2019

The Hungarian economy had expanded 4.9 percent in the third quarter. Household consumption and investments had continued to be the key drivers of growth. Investments had surged 20 percent year-on-year, underpinned by additional utilization of EU funds, while household consumption had risen 4.7 percent year-on-year. Exports rose 3.4 percent year-on-year, with imports rising 5.9 percent year-on-year.

On the production side, construction and services mainly contributed to the growth, rising 27.5 percent and 3.8 percent, respectively. Agriculture had also performed well, rising 3.4 percent in the third quarter, whereas industry’s performance was weak.

According to an Erste Group Research report, the Hungarian economy is likely to expand 4.6 percent year-on-year in the whole of 2018. Household consumption is expected to have stayed solid in the fourth quarter and is likely to remain the main growth driver next year. Labor market conditions are likely to stay tight, suggesting the continuation of wage rises. This fact, along with increased lending activity of banks, implies stable consumption.

However, investments are likely to decelerate in 2019, as utilization of EU funds might slowly come to an end. Meanwhile, the contribution of net exports to GDP growth is expected to stay in negative territory, as uncertainties surrounding exports’ growth prospects have increased, while solid internal demand should continue to attract high imports.

“The economy is expected to slow to 3.6 percent annually in 2019”, added Erste Group Research.