Hungarian economic growth below historical trend

At its meeting in May, the Monetary Council of the central bank did not change the base rate (13%) but started to cut the policy rate. The central bank cut its effective rate, the overnight deposit facility rate, cut by 100 basis points to 17.0%. This is the first time since the end of the interest rate hiking period in October that the Magyar Nemzeti Bank has significantly changed monetary conditions.

Raw data show that retail sales decreased by 12.6%, while calendar-adjusted data show that it decreased by 13.1% in March 2023, compared to the same period of the previous year. Within this, sales increased by 10.3% in specialised and non-specialised food shops and by 9.6% in non-food shops. The lifting of the fuel price cap in December led to a sharp 29.3% drop in petrol station sales.

In May 2023, the SZIGMA CI indicator, which provides a snapshot of the current state of the Hungarian economy, showed a reversal in the trend of economic growth until April 2023. The growth rate has started to approach the historical trend rate.

The other indicator, SZIGMA LEAD, is a short-term indicator for the future of the Hungarian economy, continues to point to stronger economic growth, which may stall between December 2023 to January 2024.

In an environment of higher interest rates and higher inflation, the trend towards a preference for premium Hungarian government bonds with above-inflation yields over those with fixed yields continued.

Significant improvement in foreign trade

In March 2023, the EUR value of exports was 16.0% higher and the EUR value of imports was 2.1% higher than a year earlier. This brought the foreign trade surplus in goods to EUR 898 million, which is EUR 1 718 million better than a year earlier.

The full report can be downloaded here: 

The SZIGMA indicator system

The SZIGMA (abbreviation of the Hungarian name “Századvég Index a Gazdasági Momentum Alakulásáról”, in English: Századvég Index of the Development of Economic Momentum) is a simultaneous and preliminary indicator system developed by Századvég for the Hungarian economy.

It is crucial for economic policymakers and analysts to have an accurate picture of the state of the economy, but statistical data are often available with considerable delays. In contrast, the SZIGMA indicators provide information on the economic cycle and the business cycle within 30 days of the reference month, on a monthly basis.

The indicator system consists of two indicators, the SIGMA CI, which summarises the current state of the economy, i.e. information extracted from simultaneous variables, and the SIGMA LEAD, which provides preliminary information on the expected economic trajectory. A positive CI index means that economic growth is above the historical trend, and a negative CI index means that growth is below the historical trend. The SIGMA LEAD indicator provides a short-term forecast for a 9-month period. If the SIGMA LEAD indicator is positive, growth is expected to be above trend in 9 months' time (i.e. three quarters of a year later), while if it is negative, growth is expected to be below trend in the near future.

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