USD137.1bn (World ranking 58, World Bank
9.9 million (World ranking 88, World Bank
Generally stable parliamentary
Strong specialisation in
Current account surpluses since
climate, as a consequence of
unconventional economic policy
measures since 201
At times, difficult relations
with the IMF and the
High public debt and large
total external debt
Slowdown continues in 2016
Real GDP growth decelerated to +2.9% in 2015 from +3.7%
in 2014, mainly a result of reduced EU fund absorption.
The latter caused fixed investment growth to drop to
just +1.9% (+11.7% in 2014) while inventories
subtracted some -0.3pps from overall 2015 GDP growth.
Private consump¬tion increased by a solid +2.6% (+1.5%
in 2014) while government consumption was up by just
+0.6% (+5.8% in 2014). Exports expanded by +8.4% in
2015 (+7.6% in 2014) outpacing imports at +7.8% (+8.5%
in 2014) so that net exports added a considerable
+1.2pps to 2015 growth (-0.1pps in 2014).
In Q1 2016, real GDP growth dropped to +0.9% y/y, due
to a sharp drop in investment as well as exports losing
momentum, while private and public consumption rose
robustly. Euler Hermes forecasts full-year GDP growth
to slow down further to about +2% in both 2016 and
2017, due to less dynamic investment and export
Monetary policy is officially based on inflation
targeting (3% ± 1pp since 2007). Since August 2012 the
key policy interest rate has been reduced in 32 steps
from 7% to 0.9% in May 2016, initially in order to
support economic growth and then to fight deflation
pressures. The latter has returned in early 2016 and
one or two more rate cuts are possible this year. EH
expects inflation to gradually pick up in H2 2016,
reaching 1% or so by year-end.
Following the considerable downtrend and high
volatility in 2010-2014, the HUF/EUR exchange rate has
steadied since early 2015, reflecting improved economic
fundamentals. Going forward, Euler Hermes expects the
exchange rate to remain somewhat volatile but fairly
stable in trend.
Public finances have improved but need continued
monitoring. The fiscal deficit has fallen to -2% of GDP
in 2015 and should remain around that rate in
2016-2017. Public debt has gradually improved from the
peak of 81% of GDP in 2011 but will remain relatively
high at about 75% in 2016-2017.
The current account has been in surplus since 2010.
This has helped reduce total external debt from 154% of
GDP in 2009 to 110% in 2015 which, however, is still
among the highest in the region.
A cause of concern is the sharp drop in FX reserves
from EUR38bn in early 2015 to EUR25bn in May 2016 and
the corresponding fall in import cover from 5.0 to 3.1
months (now just above the 3-month threshold considered
adequate). The main reasons for this have been
redemptions of central bank swap contracts related to
the phasing out of household FX loans and redemptions
of FX-denominated govern¬ment bonds. Close monitoring
Last review: 6/22/2016