One good example is vacations. If we take one week as the minimum period needed for relaxation, more than two-thirds of Hungarians, 69%, said they do not plan to go for seven contiguous vacation days this year. Indeed, only 29% reported that they will definitely go on vacation or have already been.

Younger generations are more likely to spend on vacation; 45% of 18-25-year-olds said they will leave for at least seven days. As for the amount paid, most respondents, 24%, said they are budgeting between HUF 100,000 and HUF 300,000, while 26% preferred not to disclose the amount. Even that does not mean a carefree break, as only 17% said they would not keep an eye on how much they spend and could buy anything they want.

In the case of auto sales, there is a clear and growing trend. By the end of May, about 368,000 cars had been sold in Hungary, 13% more than last year. With the slow improvement of the financial situation, it seems households have started making auto purchases again, but of older and cheaper variants.

Almost two-thirds of the sold cars (61%) were at least 15 years old; one-third (37%) were at least 20 years old. The sales of new autos reached 51,605, a 9.5% growth compared to last year, according to data gathered by car seller website joautok.hu.

Housing Costs

While cars are not a vital necessity for living, housing most certainly is. Quoting the Central Statistical Office (KSH), the Intrum debt collection company indicates that in Q4 2023, second-hand apartment prices in Hungary rose by an average of 2.6%, and new apartments by 11.5% year-on-year.

Budapest is ranked among the least affordable capital cities in the EU, with 11 years of average salary needed to purchase a 75 sqm apartment. In contrast, prices dropped significantly in some European countries compared to the 2022 peak, driven chiefly by credit rates and monthly installment growth, especially in Germany.

In Hungary, most loans have fixed rates; consequently, there was no means to curb the real estate price growth. That is both good and bad news for Hungarian home buyers. The monthly installments do not change, but with real estate prices growing, monthly installments rise higher and higher. This results in less money left for other expenses or, put another way, lower solvency.

“The more money people spend on housing [installments] or downpayments [to buy or rent], the less money is released into the economy. This causes a significant problem in Budapest, as spending on housing is among the highest in the European Union. This situation may be remedied with a major increase in incomes and a change in housing structure in Hungary,” Károly Deszpot, deputy CEO at Intrum, said.

Other figures show a less dramatic picture, at least by age groups. The financial situation of the middle-aged population has improved in Hungary, according to research from K&H Secure Future. In one year, the proportion of those facing financial difficulties decreased from 34% to 26%, and those with sufficient income and occasional savings increased from 23% to 36%.

Middle-aged Improvement

Following the easing of the previously unfavorable economic environment, the slowdown of inflation, and the increase in real wages, middle-aged people are in a more favorable financial situation, according to the Q2 results of the K&H research.

Regionally, Budapest seems to be developing quickly economically; while last year, the GDP per capita in the Hungarian capital stood at 155% of the EU average, today, it has risen to 158%. Other areas in the country also show measurable, if slower, growth.

However, at a national level, the situation is less bright. Based on data from Eurostat, the pan-EU statistical body, Hungary stood at 76% GDP per capita of the EU average last year. Improvement depends on the performance of the world economy, Intrum says. If the improving trend continues, the financial situation of Hungarian families may also stabilize in the next few quarters.

Many companies believe that artificial intelligence will boost efficiency and productivity in the world economy. Employees are less enthusiastic, however, and most feel they need AI knowledge to remain competitive in the market.

Meanwhile, according to a survey by Intrum, Hungarians are less worried about AI compared to the citizens of some of their closest peers in the Visegrád Four countries. In Slovakia and the Czech Republic, 29% of the employees express AI-related concerns. Elsewhere in Europe, in Sweden, Greece and Italy, this rate is much higher at 38-39%. Hungary and the Netherlands are among the techno-optimists, with 17% and 16% respectively.

Spending on Groceries

Market research company GfK measured the amount of money spent per capita in the retail market in Hungary, recording a figure of EUR 4,572. This represents 70% of the European average of EUR 6,517. As expected, the highest purchasing power across the country is in the capital city, albeit it is still below the national average for Slovenia and Croatia. Bulgaria is roughly at the level of the poorest Hungarian county, Szabolcs-Szatmár-Bereg, which stands at 84% of the national average for money spent in retail.

This article was first published in the Budapest Business Journal print issue of July 26, 2024.