ECONOMIC OVERVIEW FIRST QUARTER 2023
In the first quarter of 2023, the performance of the Hungarian economy fell by 1.1% compared to the same period of the previous year (balanced data adjusted for calendar effects). This is also a drop compared to the previous quarter (-0.2%). The decline in performance is due to the weakening of industry (-3.1% in the January-March period, compared to the same period of the previous year). The strengthening of the economy is hindered by the fact that the real value of earnings decreases as a result of high inflation, the tightening of monetary measures and high loan interest rates freeze investments, in addition, the still high energy prices cause cost increases that are difficult for economic players.
In the first quarter of 2023, the performance of the construction industry decreased by 9.2% compared to the high base of a year earlier. Construction producer prices for buildings increased by nearly 24%. Development volumes varied between sectors: residential construction fell by 20% compared to Q1 2022 (housing permits fell by 38%), office space delivered (26.000 sq m) was only a third of the previous year's level, while logistics development increased tenfold (111.000 sq m).
The fall in retail sales was significant in the January-March period: -9.5%. Among the main product categories, sales of fuel, which is no longer officially priced, fell the most (-19%), but demand for food also fell significantly (-8%). The fall was driven by a further decline in household consumption due to high inflation.
Turnover in commercial accommodation increased slightly compared to the previous year, with 4.5 million nights registered, an increase of 1.3%. In the first quarter, a total of 2,898,000 passengers used Budapest's airports, 46.4% more than in the same period last year and only 8% less than before the pandemic.
In the first three months of the year, average inflation was still above 25% (25.4%), compared to 4.3% a year ago. Household energy and food prices increased the most (48.2% and 43.3%). According to the MNB's March forecast, inflation will continue to be strong in 2023: it is expected to be between 15-19.5% annually; after that, it may return to below 5% in 2024.
The unemployment rate rose to 4% by the end of March, but labor shortages remain significant in many areas. The tourism and hospitality sectors are particularly affected. The employment rate of 15-64-year-olds was 74.3% at the end of the quarter, and was the highest in the capital city (79.3%). In February 2023, the gross average salary of those employed full-time was HUF 531,200, and the net average salary calculated with allowances in mind was HUF 366,400. The gross average earnings were 0.8% and the net average earnings 1.2% higher than a year earlier.
The MNB's base rate stood at 13% at the end of March, while the Budapest Interbank Forint Loan Interest Rate (BUBOR) was at a similar level to the end of the previous year at 15% over 12 months. The forint stopped weakening against the euro, falling from around 400 in January to around 380 by the end of March (and even below 370 in May).