Hungary is on a balanced, albeit still relatively moderate growth path, gradually reducing its macroeconomic imbalances. Real GDP has surpassed its pre-crisis peak and the growth potential has been gradually recovering. Nevertheless, Hungary's rate of potential growth remains a full percentage point lower than before the crisis, which was already comparatively low. In 2015, GDP is estimated to have increased by 2¾%, supported by strengthening private consumption and healthy export growth. A decline in EU-funded investment is projected to slow growth in 2016, but continuing support from private consumption and a gradual recovery in EU-funded investment will see growth returning to levels slightly above potential in 2017. As the impact of lower energy prices fades, inflation is projected to revert to the central bank’s target rate by the end of 2017.
Hungary is experiencing no macroeconomic imbalances. Although high external debt rollover needs and the share of non-performing loans remain a concern, risks linked to external and internal liabilities have been reduced. The marked reduction in net external liabilities has been driven by high current and capital account surpluses. Credit flows to the private sector remain subdued in a context of low bank profitability. Policy measures have been taken to make the regulatory environment more predictable in the financial sector, lower the tax burden on banks, reduce the proportion of debt held in foreign currency and introduce subsidised lending schemes. The impact of these recent measures on bank lending is still to materialise. Moreover, policy gaps remain regarding non-cost competitiveness, productivity and the overall business environment.
Read a complete analysis of Hungary's economy in the country report 2016 [2 MB]
2015 recommendations in brief
The Commission has made five country specific recommendations to Hungary to help it improve its economic performance. These are in the areas of: public finances; financial sector; taxation; labour market; education.