The trend continued this year, albeit slower: 3.8% in January, 3.7% in February and 3.6% in March. But in April, it went back up to 3.7%. The figures for May will be released around June 10.
There is no need to worry, the Central Statistical Office (KSH) figures indicated. As per the data released on May 23, the average gross wage in Hungary rose year-on-year by 13.9% to HUF 658,400 and the net wages by 13.7% to HUF 452,700. Real wages rose by 9.9%, according to KSH.
A survey conducted by financial and tax consultancy Moore Hungary and Trenkwalder released in April confirmed the KSH data. The average hourly wage of physical workers was HUF 2,061 in Q1, 15.9% higher y.o.y. True, other categories saw lower growth rates. Middle management, earning monthly between HUF 800,000 and HUF 1.2 million gross, registered a wage growth of 10.3% compared to the same period in 2023. In this category, real wages grew by 6-7%, according to the survey.
So, is all well among Hungarian employees? Not necessarily. In March, Intrum released its annual European Consumer Payment Report, the ECPR. The data had been acquired between July and September last year, with 20,000 respondents from 20 countries. Only one-third of Hungarians said they live a financially stable, stress-free life, compared to a European average of 46%.
The majority of Hungarians said they felt they were progressing slowly financially, with three-quarters saying that, no matter how hard they worked or tried saving, they could hardly become wealthy. The most pessimistic groups in Hungary were women and Generation X, while Gen Z and the Baby Boomers felt they had sufficient monthly income to live a comfortable life.
On the other hand, Boomers feel excluded from the labor market, and only 21% think they can advance professionally, compared to 50% of Gen Z. Overall, almost half of Hungarians, 42%, believed they would not be able to afford one week of summer holiday this year.
Another survey released periodically by Intrum, this time in cooperation with the economic research institute GKI, is the IFI solvency index. This summarizes the financial security of households in a single figure, factoring in income, the volume of loan debt, the value of savings, as well as the cost of living.
According to the latest report, released in May, in the first quarter of 2024, the IFI continued a growth trend that started at the end of 2022, surpassing 10 points for the first time to 11.95. The growth is not steady, though: following significant growth in January and February, in March, it slipped back by 13% compared to the previous month.
Explaining the data, Judit Üveges, sales director at Intrum, said that the drop in March indicates that it is too early to celebrate by looking at January and February alone.
“This is especially so because we continue to be exposed to significant instability at the world economy level, and the tensions accumulating at the political level can have a negative impact on the solvency index this year,” Üveges said.
There are many instability factors. An endpoint to the war in Ukraine is unpredictable, and the same is true in the Palestinian territories, which also impacts Red Sea transports. Should Donald Trump be re-elected as President of the United States in November, U.S.-EU relations would be shaken both on the military and economic levels, according to the Intrum press release.
In Hungary, inflation remains a significant risk, Intrum says. While the government hailed the drop from 25.7% in January 2023 to less than 5% in March 2024, it should be noted that the drop in purchasing power was a significant contribution to this trend. Food prices soared to more than 25%, caused by weak crops last year and the windfall taxes for retail chains.
Considering these factors, it is too early to celebrate the inflation figures, which may prove only temporary, Intrum warns.
“If the main causes of high inflation are not addressed properly, an early declaration of victory over inflation could lead to economic instability, a decrease in solvency and an impact on GDP growth. Maintaining balance is crucial for economic stability and protecting the population’s income,” Üveges said.
A return to high inflation would increasingly erode income and savings. We already see growing service prices fueled by telecommunication and banking fees. Further, marked growth in waste management and water prices is expected this year.
Intrum noted that the government had abandoned its anti-inflation stance and adopted a more expansive economic policy, which will contribute to inflating prices. Solvency is expected to deteriorate again, albeit at a slower pace than after the start of the war in Ukraine, which will lead to lower standards of living, Intrum warned.
Recent research surveying the auto purchasing preferences of Generation Z in Hungary found that the main factor for them is price rather than brand. Also, young people in Budapest are more likely to opt for public transport, while those in the countryside prefer to use a car to get from A to B. The same is true for driving licenses: Gen Z-ers in the capital get their driving license as soon as possible, but unlike their rural counterparts, they don’t get behind the wheel immediately. Some 60% of the young people interviewed own an auto. In most cases, they buy second-hand vehicles that are more than 15 years old. Due to the higher prices, Gen Z is less keen on electric vehicles, and 71% think it is important to test drive a car before buying it.
This article was first published in the Budapest Business Journal print issue of May 31, 2024.
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