Hungarian GDP Stagnated in Q4 2023
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Hungarian GDP growth in 2023 was revised down to 0.8% from the preliminary estimate of 1.0%.
The economy stagnated in Q4 2023, following growth of 0.3% in Q3.
The slowdown was driven by a decline in industrial output and construction activity.
Agriculture, human health and social care, and information and communication were the main contributors to growth.
Inflation remained elevated in January 2024, rising 3.8% year-on-year.
The trade balance improved in January, with exports falling less than imports.
The budget deficit narrowed in Q3 2023 compared to the previous year.
Analysts expect GDP growth in 2024 to be around 3%, below the government’s forecast of 4%.
According to the Hungarian Central Statistical Office (KSH), gross domestic product (GDP) was unchanged in Q4 2023 compared to the previous year, based on raw data.
Seasonally and calendar-adjusted and balanced data showed a 0.4% increase in GDP in Q4 2023 compared to the same period of the previous year.
Compared to the previous quarter, the economy’s performance was also unchanged, based on seasonally and calendar-adjusted and balanced data.
For the full year 2023, GDP growth was revised down to 0.8% from the preliminary estimate of 1.0%.
The slowdown in economic activity in Q4 2023 was mainly due to a decline in industrial output and construction activity.
The decline in industrial output was driven by a number of factors, including weak external demand and supply chain disruptions.
The construction sector was also hit by a decline in activity, as new orders and investment fell.
Agriculture, human health and social care, and information and communication were the main contributors to growth in 2023.
Inflation remained elevated in January 2024, rising 3.8% year-on-year.
The trade balance improved in January, with exports falling less than imports.
The budget deficit narrowed in Q3 2023 compared to the previous year.
Analysts expect GDP growth in 2024 to be around 3%, below the government’s forecast of 4%.
Weaknesses of the Hungarian Economy in 2024
High Inflation: Inflation remains a challenge for the Hungarian economy, putting increasing pressure on real wages, savings, and business costs. Although inflation has started to moderate, it still remains above the MNB’s target.
Labor Shortage: The shortage of skilled labor is hindering economic growth. The labor market is tight, and emigration continues to be a problem, holding back companies from expanding and investing.
External Imbalances: Hungary has a significant current account deficit, which increases its need for external financing. Hungary may be vulnerable to global financial market volatility and changes in investor sentiment.
Dependence on EU Funds: The Hungarian economy has a structurally high dependence on EU funds. Uncertainties surrounding the use of development funds can hinder investment and long-term growth.
Low Productivity: Hungarian productivity lags behind the EU average. This limits competitiveness and long-term growth.
Low Innovation Activity: Hungarian companies generally invest little in R&D and innovation. This limits competitiveness and the country’s ability to move up the value chain.
High Government Debt: The level of government debt has moderately decreased but remains high. This limits the government’s room for maneuver in times of economic crisis.
Deteriorating Demographic Situation: Hungary’s population is rapidly aging and shrinking, which will have a negative impact on economic growth and the sustainability of the pension system in the long term.
Economic Structural Problems: The Hungarian economy is overly reliant on a few industries, such as the automotive industry, which makes it vulnerable to external shocks. Rising protectionism and the reshuffling of supply chains can increase the uncertainties of the Hungarian economy.