Where is Hungary’s economy headed in 2021?

Hungary’s economy has been growing steadily since 2013 at a rate of 2% to 4% per year, although the recent coronavirus crisis is likely to cause a slump in the country’s economy.

According to the Organization for Economic Co-operation and Development (OECD), Hungary has managed to contain the spread of the virus successfully, which could give the country a chance to see a sharp rebound in its economy in 2021.

This rebound could be primarily driven by pent-up demand in the country and by the progressive recovery of the euro region’s economy.

Meanwhile, Hungary also plans to continue supporting its domestic economy through expansionary policies including higher government expenditures and continued assistance to local businesses through cheap loans backed by the National Bank of Hungary.

What is driving growth for Hungary’s economy?

Hungary’s stock market (BUX) is down 22% for the year, as the country’s economy is still struggling to recover from the economic fallout caused by the virus.

Investors appear to be put off by the fact that a second wave of the virus could hamper the country’s economic recovery and, therefore, although the BUX index has rebounded off its March lows, investors are still hesitant to buy stocks at the moment.

Before the virus stroked, Hungary’s economy was on track for another good year, primarily fueled by record-low unemployment levels and higher private consumption. 

These higher levels of consumption were supported by an increase in wages in the private sector, although inflation risks loomed in the backdrop during 2019.

It is important to note that the services sector accounts for the highest percentage of the country’s gross domestic product at 65% – which makes Hungary an emerging market – followed by industries, which contribute more than 30% to the nation’s economy.

Meanwhile, Hungary has managed to attract foreign investments in the past five years, with the country positioning itself at the top of the list in terms of inward foreign direct investments in the region, only behind Estonia and the Czech Republic.

Germany remains Hungary’s top export destination, which could benefit the country during its recovery, as Germany’s economy has managed to rebound quite rapidly from the coronavirus crisis, while the government has also acted swiftly to contain the spread of the virus, although fears of a second wave appear to be materializing.