Economic Figures
Macroeconomic data 2007 |
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Forecasts basically agree that in 2008, the Hungarian economy will start to increase, but in very little steps. The internal and external equilibrium will become noticeably stronger, but the real earnings will be only slightly higher. The inflation is to abate slowly as well. |
GDP growth: 1.3% GDP: 117 bn € GDP per head: 11,700 € Export growth (prices in €): 15.7% Import growth (prices in €): 11.9% Inflation: 8% Unemployment rate: 7.7% Currency: Forint (ft) Exchange rate to the EUR: 251.3 (av. 2007) |
The growth will be lower than that of the rest of the new EU member states. The increasing domestic demand (which is generated predominantly by investments) partially counterbalances the decreasing export demand. The main driving factor of the economic growth is still the industry which is to be stronger with 5-6% by the end of 2008. Business services also can count on relatively favorable circumstances this year. The transport sector will probably expand slower than in the last year. The transit shipments grew very fast mainly because of the EU accession of Romania and Bulgaria, but currently this sector cannot expect such advantageous events. The agricultural production has to increase – due to the bad weather conditions in 2007 we can reasonably expect better for 2008. Heightened agricultural production will also increase the domestic demand. The financial sector faces new market possibilities because of the co-financing of the EU projects (Hungary starts using considerable EU funds in 2008).
Current situation and forecast |
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Key Indicators |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
Real GDP growth (%) |
1.3 |
2.5 |
3.6 |
3.9 |
3.7 |
3.5 |
Consumer price inflation (av. in %) |
8.0 |
5.7 |
3.3 |
2.6 |
2.4 |
2.2 |
Budget balance (% of GDP) |
-5.6 |
-4.1 |
-3.2 |
-2.9 |
-2.7 |
-2.4 |
Current-account balance (% of GDP) |
-5.6 |
-5.9 |
-6.4 |
-6.7 |
-6.2 |
-5.8 |
Short-term deposit rate (av. in %) |
6.9 |
6.8 |
6.5 |
6.7 |
6.2 |
5.7 |
Exchange rate Ft:US$ (av.) |
183.6 |
171.5 |
186.1 |
187.9 |
186.5 |
185.6 |
Exchange rate Ft:€ (av.) |
251.3 |
250.0 |
247.0 |
240.0 |
235.0 |
232.0 |
Source: The Economist
Export remains one of the most important motors of the economy, but it will lose some of its dynamism due to the narrowing of the European business opportunities. The vast majority of our export is targeted to the EU. On the other hand, the import will be kept on level by the intensifying investments. The deficit of the current account remains approximately the same – about 5 billion euros.
Nominal income is also expected to increase slower than in the last year. The growth of gross earnings will be 8% in the business sector and 7% in the public sector. Real wages will grow by 0.5-1%.
Opportunities for Investors
In general, investments are expected to grow by around 5% in 2008. Public services will probably live a period of stagnation. The building industry and the trading sector will moderately grow. The agricultural sector can produce dynamic expansion even with average weather conditions. The comparative advantages of the Hungarian economy are the freedom of trading and investments, the widespread presence of foreign ownership, the relatively well-educated population, and the traditionally good scientific education and researches. Disadvantageous factors are the high level and unfavorable structure of taxes and contributions (that puts serious charges on the living labor force and causes a high redistribution of incomes).
The measures of the government are also not always predictable, because the parliament is dominated by two almost equally strong opposite parties. Currently the Hungarian Socialist Party (MSZP) governs together with the Hungarian Liberal Party (SZDSZ). They have stable majority in the parliament, but they lost much of their popularity and credibility because of unpopular restrictive measures and a scandal around the person of the prime minister. So the opposite side (mainly the FIDESZ – a rightist, conservative party that is the bigger force in opposition) has very good chance to win the next elections in 2010. Nevertheless, the great social care and health systems are out of question in need of structural reform. The accent is on »how«.
LABor market: education, personnel and employment
Hungary’s population is approx. 10,000,000 and 57% of the working aged people are employed (approx. 3,900,000 persons). This is considerably lower than the average employment rate of the EU. The intention to find a job is especially low among the »oldest potential employees« (between 55 and 64), because many of them are entitled to pension or some pension like benefit. When Hungary started the transition to market economy in the early 90s, the age limit of retirement was quite low (55/60 for women/men) and it remained so until ’97. In addition, many people tried to escape from unemployment by retiring to disability pension.
According to recent studies, the proportion of the graduated people in the entire population is around 15%. It is characteristically higher in the big cities. About 66% of the labor force has completed at least some kind of technical, vocational or secondary education. The geographical mobility of the labor force is relatively low, due to the disproportionately high costs of relocation in comparison to the salaries.
In 2008 the gross monthly average salary is 185,000 HUF (approx. 740 EUR). The employee gets 116,000 HUF net. in his hand from it. The total salary cost charged to his employer is 248,000 HUF monthly. Beyond average, there are quite big differences in the salary that depend on sector, company size and ownership. Big multinational companies probably give higher salaries, especially on higher levels of the hierarchy. Broadly speaking, earnings are lower and unemployment rate is higher in the eastern part of the country.
The demand for the well-educated labor force has been increasing constantly in the recent years. The development of the education system answered successfully to this demand in general, especially on the highest levels of education. However, the adult education and the vocational training lag behind the Western-European level. 11% of the population passed a medium or high state degree examination of a foreign language. The situation is much better among young men. English and German are the most frequently known languages.
Hungary joined the so called Bologna process, and from 2006 starts educational programs only in accordance with the Bologna system. Hungary has honorable traditions in some areas of engineering, medicine and sciences.Competent on site PersonNEl consulting
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