Quarterly growth signals end of recession

The economic performance was 0.4% lower according to raw data and 0.3% lower according to seasonally and calendar adjusted and reconciled data in the 3rd quarter of 2023 than in the same period of the previous year.

The decrease in the economic performance was mostly owing to falls in industry and market services, within which latter mainly in wholesale and retail trade as well as scientific, technical and administrative activities. The good performance of agriculture lowered the reduction. The decrease in the value added of services was partly offset by a significant growth in section human health and social work activities.

Gross domestic product was 1.2% lower in quarters 1–3 of 2023 according to both raw data and seasonally and calendar adjusted and reconciled data than in the corresponding period of the previous year.

Marton Nagy, the economic development minister, said after the KSH release that restoring economic growth was “the next big task” after having curbed inflation.

The ministry statement said that the economy began growing again in the third quarter, adding that Hungarian growth had outperformed most other EU member states in the quarter.

He said the war in Ukraine and associated sanctions, as well as “profiteering by multinationals”, had battered the economy, businesses and families.

Although quarterly growth was positive, the economy contracted on annual basis, he noted, adding that the government still had work to do. Nagy referred to state-backed targeted loans under various schemes worth the equivalent of up to 1.5 percent of GDP, as well as the Factory Rescue scheme which subsidises energy-intensive businesses and frees companies from unfavourable energy contracts, among other measures.

He said a pick-up in consumer demand was expected and this would contribute to further growth. Real wages were likely to grow again from September, with a 4-5 percent increase next year, his statement said.

Talks on next year’s minimum wage between employers and employees will continue this week, with possible increases as early as this December, he noted.

One obstacle to growth recovery, he said, was high interest rates on the back of the central bank’s base rate exceeding inflation. This, he added, put a drag on consumption and deterred entrepreneurs from investing and developing, so damaging competitiveness and growth.

The economic development ministry, Nagy noted, has drafted a 10-point proposal in order to further increase employment and GDP and further strengthen competitiveness, with a goal for manufacturing to account for 30 percent of GDP by 2030 and the logistics sector to make up 10 percent. By that time, Hungary will have reached 90 percent of the EU level of development, Nagy said in his statement.