Hungary’s GDP grew as Consumer Spending Increased in Q2 2024
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Loading... - Lily Walter
- 10 Sep 2024
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Hungary's economy has shown resilience with GDP growth driven primarily by increased consumer spending, according to a report from Világgazdaság. This uptick in consumption is attributed to a steady rise in wages, which has bolstered household spending. As a result, Hungary's GDP grew by 1.5% on a raw basis and by 1.3% on a seasonally and calendar-adjusted basis in the second quarter of 2024, compared to the same period last year. This growth rate is above the EU average, reflecting the positive impact of government measures aimed at supporting consumer demand.
However, the broader economic landscape remains challenging. The lack of foreign demand, particularly due to economic difficulties in Germany—Hungary's main export market—has negatively impacted the industrial sector. Industrial output fell by 1.5% compared to the previous quarter and by 2.4% year-over-year, mirroring the downturn in Germany's economy. Additionally, the country faced a significant drop in investment, with gross fixed capital formation (GFCF) falling by 15.4%, including a sharp 35% decline in manufacturing investment. These declines are partly due to the ongoing war-related caution, uncertainty, and a sharp fall in orders.
Despite these challenges, consumer spending continues to be a bright spot for the Hungarian economy. Real wages increased by nearly 10% in the first half of the year, contributing to a 4.2% rise in household consumption expenditure. While cautious saving behavior persists, the increase in financial wealth during the first half of the year suggests that consumers have more capacity to spend, which could further boost GDP growth in the coming quarters.
Looking ahead, the report notes that new foreign investments, particularly in working capital, could help reverse the current downturn in industrial and manufacturing investments. If consumer confidence continues to strengthen, and external economic conditions stabilize, Hungary's GDP growth could accelerate further, bringing it closer to the EU average.
