Overview of the macro economy and public finances in the first half of 2021 (in Hungarian)

The first chapter of the study offers an overview and an outlook on the global economic environment, which in 2021, too, will have at least as great an impact on the Hungarian economy, if not greater, as earlier, given the circumstances of a post-crisis restoration. Economic stimulus measures were launched at around the same time all over the world, and this gave global trade a significant boost, giving the world a chance to return to the trends that suffered a break in 2019.   After suffering a fall last year, the volume of trading in goods lifted considerably in 2021, especially in emerging countries, which includes China as well.  In the past months, however, a slowdown of trades was experienced, which is likely to be owing to the bottlenecks in logistics and the oversupply in certain raw materials and parts.

The second chapter lays out possible factors influencing the Hungarian economy and the components of GDP production and use, and the most probable trajectories of these components.  One of the lessons of the past few quarters is that the Hungarian economy has proven to be more resilient against hte second and third waves of the pandemic than previously expected. In the first two quarters of this year, the seasonally and working-day adjusted GDP volume continued to rise in comparison with the previous quarter, and at a good pace, too. On the production side, services were the only branch of the national economy where turnover volume was down compared with pre-crisis levels.

The third chapter looks at fiscal and monetary processes. It provides a detailed assessment of the 2021 budget, on the shaping of items on both the expenses and income side. It presents changes in the Hungarian public finance deficit and government debt in comparison with other European Union countries. It examines the size of Hungarian government debt, its ratio to GDP and changes in its components, especially with a view to the effects of the crisis on the budget. It establishes that the Hungarian government continues to conduct a pro-cyclical fiscal policy, targeting a high public debt-to-GDP ratio, despite fast economic growth. Notably, the frequently changing deficit targets and the government’s authoritative and unbridled spending decisions, which are lacking (parliamentary) control, make it difficult to analyse and make projections for fiscal processes.   

Finally the study analyses the main characteristics of monetary policy and the shaping of exchange rates and government bond yields, also in a regional comparison. The inflationary outlook gives cause for concern, as it is fuelled not only by a spike in domestic demand, but also by rising global raw material prices and inflation imported from abroad, which is strengthened further by the spurring effect on demand of an expansive fiscal policy.

Fiscal Council of the Hungarian Parliament, Contract No. KVT/6/2021
August 2021
Project leader:
Éva Palócz
Rozália Bogó, Zoltán Matheika, Miklós Losoncz, Katalin Nagy, Éva Palócz, Péter Vakhal