Hungary – Key Facts (Written by CUB

HUNGARY – KEY FACTS

There are three sectors that contribute most to the national GDP: Agriculture (4.2%), Industry (30.1%) (within this Manufacturing (22.1%)) and Services (65.7%). The main pillar of the Hungarian economy is the services sector; however, according to the Hungarian Central Statistical Office, the share of the services sector within GDP is around 70-80% in the more developed European Union countries, while it is at 65% in Hungary. Gross value-added services have increased by 4.6% in 2019.

GDP, considering its volume, increased by 4.5% in the fourth quarter of 2019, with the contribution of the various sectors coming to: Services 2.6%; Industry 0.7%; and Construction 0.6%. In 2020, the economic influence of the COVID-19 pandemic was manifested within the results of the second quarter of 2020.

The economy is set to shrink markedly this year, hammered by lockdown measures and disrupted global value chains. Consumer spending will fall due to rising unemployment and the heightened uncertainty ahead, which will also hurt investment activity. Hungary’s GDP is projected to drop by 7% in 2020, after growing by 4.9% in 2019.

Household consumption is forecast to decrease with the hit to labor income and higher precautionary savings. Investment, which was already on course for a slowdown before the pandemic, is projected to plummet from a record high level in 2019. Due to the recession, several ongoing projects are likely to be cancelled or put on hold.

Exports are expected to drop sharply in 2020 because Hungarian exporters are specialized in highly cyclical products (e.g. automotive) and in tourism and travel services that will remain constrained by physical distancing measures.

The cyclical recovery could lift GDP by 6% in 2021, supported by all final demand components. The Hungarian GDP is expected to return to pre-crisis levels by 2022.

Figure 1.1: Current Credit Ratings of Hungary

Credit Rating of Hungary by Fitch

Credit Rating of Hungary by Standard and Poor’s

Credit Rating of Hungary by Moody’s

BBB

BBB

Baa3

Source: Fitch, Standard and Poor’s, Moody’s