Hungary’s wage growth likely to accelerate further in 2017

Hungary’s wage pressure has already shown up as the pace of rise in nominal wage has quickened significantly in 2016. This is due to the domestic labor market tightening. During the January and November 2016 period, the average gross wage growth rate came in at 6.6 percent year-on-year, whereas net wages were up 8.2 percent on average because of the one percentage point drop and the loosening conditions of the family tax credit, noted Erste Group Research.

The jobless rate, by the end of 2016, fell to 4.5 percent, which is quite close to the full employment level. Meanwhile the general minimum wage was increased by 15 percent, while the minimum wage for qualified workers with a trade was raised by 25 percent in 2016. Thus wage dynamics are likely to accelerate even further in 2017, strengthening GDP growth through strengthening household consumption.

“We believe that the wage pressure should translate into consumer price inflation; we expect a material impact on consumer prices at the earliest at end-2017/early-2018”, added Erste Group Research.