The Hungarian economy as reflected in the World Bank’s 2012 GNI per capita figures

Each year on July 1 the World Bank revises its classification of the world’s economies based on estimates of gross national income (GNI) per capita for the previous year. The current income classifications by GNI per capita are as follows: low income = $1,035 or less; lower middle income = $1,036 to $4,085; upper middle income = $4,086 to $12,615; and high income = $12,616 or more.

If we take a look at the figures between 2008 and 2012 we find that until 2012 Hungary belonged (just barely) to the high income group. But last year the GNI per capita dropped below $12,616, the cutoff number. To be precise, Hungary’s GNI per capita income in 2012 was $12,390. With this drop Hungary joined the group of upper middle income countries and left the high income ones.

The World Bank list that summarizes the changes between 2008 and 2012 is revealing in more than one way.  Somewhat surprisingly, Hungary’s 2009 GNI ($12,980) was higher than the year before, but by 2010 it fell back to the 2008 level. The range over the first four years of the survey period, however, was not significant, as you can see from the graph below. By contrast, last year’s drop was substantial: from $12,860 down to $12,390. So, Hungarians are not living better.  It doesn’t matter what Viktor Orbán tells his people about the brilliance of Hungary’s economic policies that the whole world should imitate.

All of the countries in the region with the exception of Hungary improved their per capita GNI. Bulgaria, the poorest country in the region, moved up from $5,700 in 2008 to $6,870 in 2012. With the exception of 2010, Romania improved every year (from $8,050 to $8,420). Poland likewise–from $11,870 to $12,670–which means that Poland moved into the high income countries while Hungary dropped out of this elite group. Although Croatia’s per capita GNI declined somewhat in 2012, the country is safely in the high income zone with a figure over $13,000.

This chart, which was published in today’s Index, is telling. For instance, Slovakia was far ahead of Hungary between 2008 and 2011 and shot up even higher in 2012, reaching $17,170.

GNI/capita changes between 2003 and 2012 in the East-Central European Region / World Bank / Index
GNI per capita changes between 2003 and 2012 in the East-Central European Region / World Bank and Index

Sharp-eyed observers noticed that while there were thirteen countries globally that moved into a higher category, there were only two that dropped into a lower one: Southern Sudan and Hungary.

Opposition politicians immediately responded to the news. Csaba Molnár (DK) recalled that in Brussels at the latest summit Viktor Orbán indignantly said that he found it strange that all those countries that are so unsuccessful at handling their own economies criticize the only country in the European Union that is successful. Molnár called particular attention to Lithuania and Latvia, two countries in the region that managed to get into the high income category. Latvia’s figures are truly impressive: between 2008 and 2012 it went from $12,020 to $14,180. Lithuania also did well: $13,850 in 2012 as compared to $12,000 in 2008.

In the Hungarian miracle economy, it turns out that the deficit (as of June) is much higher than expected. Unless revenues increase dramatically in the rest of the year, Hungary’s deficit will not be under 3.0%. Actually, in the first five months the deficit reached 3.8%. As the case of Cyprus showed, the European Commission can easily put Hungary under the excessive deficit procedure again if it fails to meet its target, which would be an awful blow to the Orbán government.

In order to avoid such a calamity yet another austerity package might have to be introduced. And if the state of the treasury doesn’t improve, the planned increase in teachers’ salaries as of September 1 will have to be scrapped. As it is, the current budget doesn’t include the several billion forints that would be needed to give a modest salary raise to teachers. That may mean that Orbán’s plans for raising salaries just before the election might have to be abandoned. According to one of the trade union leaders, it is more than possible that the majority of teachers voted for Fidesz in 2010 because of its promise to raise the very low salaries of teachers. For three years nothing has happened and the teachers’ patience is running out. There are more than 100,000 teachers in Hungary. That’s an awful lot of voters whom Fidesz may lose.

MSZP suggested that the figures on poverty that were due to be released in June are being held back. Opposition politicians suspect that the figures are horrendous and that’s the reason for the delay. Whatever the cause, one suspects that poverty has risen sharply since the inauguration of the Orbán government. When will the Hungarian public reach a point of no return?

As for the government’s efforts to turn Hungarians against the European Union, they have not yet borne fruit. The majority of Hungarians still think that Hungary’s place is within the European Union. Some opposition politicians think that perhaps the 2014 election should be a kind of  referendum on Hungary’s membership in the Union. This might be a savvy political strategy. Especially if the opposition hammers home the dire consequences of leaving the EU and being isolated and locked inside the country’s borders after almost ten years of total freedom of movement across the 28-country Union. Show the people the changes that abandoning the Union would bring to their everyday lives–from an increase in the price of goods and an economic slowdown to needing visas to visit their relatives in Slovakia and Romania. I’m sure they would think twice before voting for a party that wants to keep the country totally independent. Independence has a price. Just as Hungary’s independence from Austria had a price. A very high price.

Sort by:   newest | oldest | most voted
Minusio
Guest
I think there is no question about the trends the Worldbank points to and that Orbán’s bragging was a lie – as was to be expected. From direct personal observation I know that poverty is increasing in Hungary. I know a person who was a qualified secretary at an institute of the Hungarian Academy of Sciences with some special skills (book and review lay-outing) who now has to live on a pension of about HUF 100 000 (about 340 euros). In addition, she has to pay back a FX mortgage that she fortunately was able to convert into a forint debt. Sometimes she goes to a packing station in a paper factory (at 60) for 15 euros a day. That’s like Bangla Desh! However, I would like to warn of accepting any data from any of the big world or EU organisations without a big load of skepticism. Where do they get their figures from? We know that the Central Statistical Office in Hungary has been politicised recently. The head of the German Federal Statistical Office even acknowledged that they do a lot of „interpolation“. These problems are compounded when they reach the limited wisdom of Worldbank, IMF, Uncdat, Eurostat,… Read more »
Marcel Dé (@MarcelD10)
Guest

Purchasing Power Parity figures are much better for comparing between countries.

According to the same Atlas, Hungary’s GNI per capita PPP has also dropped in 2012, from $20,380 to $20,200. As the recovery has been swift in the Baltic states, Hungary’s figure is now the lowest of all 2004 EU members, while the Czech Republic and Slovakia are slowly but surely catching up with Portugal (which Slovenia left behind a couple of years ago).

Minusio
Guest

@Marcel Dé (@MarcelD10). I agree with you that Purchasing Power is a much better yardstick.

But do you agree that per capita figures can be extremely misleading where economic differences are big and/or increasing?

Minusio
Guest

The U. S. Department of Agriculture published a graphic illustration of how much of their income people have to spend on food. I only have an Italian version. For Hungary it says 17.8%. I have some trust in the general gist – but not more.

I think we should also – not solely – concentrate on the “facts&figures” we are fed.

LwiiH
Guest

Minusio :
The U. S. Department of Agriculture published a graphic illustration of how much of their income people have to spend on food. I only have an Italian version. For Hungary it says 17.8%. I have some trust in the general gist – but not more.
I think we should also – not solely – concentrate on the “facts&figures” we are fed.

Given an median salary of 150000, 17.8 of that is 26000. I don’t see how that number could be correct.

oneill
Guest

“MSZP suggested that the figures on poverty that were due to be released in June are being held back”

Ah, that will explain why the regime has announced on Tuesday in the Nazi Nemzet 300,000 new slaves will be created next year in their *public works* scheme next year.

Guest

London Calling!

Median salary of 150,000 – forint per month?

That equates to an average annual equivalent of £21,000 GBP or about 24,000 Euros.

(In England we can only handle annual figures!)

Are you sure LwiiH ?

Regards

Charlie

Guest

Oops LwiiH sorry! Brain malfunction – just woken up and faculties not entirely in synch!

Mixing annual and monthly! Derrrr!

If you haven’t already – disregard my maths!

Regards

Charlie

Guest

Part of my problem is sheer incredulity at such a low number – I just can’t get my head around how Hungarians manage – when I know that on many basic foodstuffs you pay as much as me in England.

And that’s the median.

How do the underclass survive? Incredulous.

Guest

…and if you have an fx mortgage….. You are under water…

Guest

These numbers prove what I experience every day:

There’s a growing number of Hungarians who cannot make ends meet – and they’re getting desperate. Around Hévíz there’s still a relatively strong “lower middle class” but in the East, where my wife is from …
There was an article on this in BBJ or Portfolio which I quoted already – strange that this wasn’t discussed in more detail.

All these averages are also misleading in a way, because the income distribution is very skewed – only the median gives better info.

An old example from my math studies at university 5o years ago (how time flies …) adopted to Hungary:

There’s a village with 999 inhabitants and one Russian millionaire who earns 200 million HUF a month, while the others each earn 100 000.
That gives an average of 299 900 HUF …

OT and PS:

There are always unforseen consequences of Orbán’s crazy tax schemes, e g:

http://www.bbj.hu/business/e-toll-will-take-its-toll-on-poultry-demand-product-council-says_66433

“The electronic road toll, to be introduced in July, could make poultry 5% more expensive on average through the increase in shipping costs, the Poultry Product Council said on Thursday in a release to MTI.”

And many food prices are already higher in Hungary than say in Austria and Germany …

Maria
Guest

CharlieH :
Median salary of 150,000 – forint per month?

150 000 Forint : 340,5 X 12 = GBP 5286 per annum.

As for the cost of food: I don’t know which figures to compare to, but food is more expensive in Hungary than in Germany, partly due to the enormous VAT. I assume the median salary is the average value of people who do have a salary, i.e. in most cases has to feed more than one person, the 17,8 per cent don’t seem to be all that far off from reality. But, as Minusio stated: average values don’t say all that much.

Bowen
Guest

wolfi :
And many food prices are already higher in Hungary than say in Austria and Germany …

Wolfi, I saw a post on the Friends of Hungary Facebook site once which pointed out the exact same thing. It was comparing the price of a few basic food items in Spar (which is an Austrian chain). Of course, the same items in Hungary were more expensive than in Austria.

The main message was: look at this evil Austrian shop, cheating we Hungarians by charging us more! And the comments were full of disgust and anger at this cheating foreign shop.

So, it’s easy to blame the foreign multinationals. And by the way, let’s support Orban’s tireless crusade against these evil anti-Hungarians who would destroy Hungary!

Of course, the post completely avoided any mention that Hungary has one of the highest VAT rates in the EU.

DH
Guest

Bowen: “Of course, the post completely avoided any mention that Hungary has one of the highest VAT rates in the EU.”

Not only in the EU. In the entire universe.

Hungarian Property
Guest

CharlieH :
London Calling!
Median salary of 150,000 – forint per month?
That equates to an average annual equivalent of £21,000 GBP or about 24,000 Euros.
(In England we can only handle annual figures!)
Are you sure LwiiH ?
Regards
Charlie

Hmmm, I am wondering how did you get to this calculation?
For me it goes like:
12 x 150,000 Ft = 1.800,000 Ft
that is around £5,300 GBP at current rate.

Am I missing something here?

Guest

London Calling!

Yes – even though there is a price war for bananas in England – we have paid around 68p per kilo for years. That’s about 230 forint – way below what they are in Hungary – if you can get them.

And (whole) milk is double the price (2.3ltrs for 1 GBP (340ft) in England). And 3.6% whole milk is like rocking horse manure – with a short shelf life if you do find it.

And with 27% VAT- and butter on ‘fat tax’ (?) – I always bring Butter, Cheese and frozen whole milk from England for the freezer in Hungary. (Not to mention Coffee (beans), Porridge, Marmalade and Marmite!)

Our food is mostly zero rated – so there can be a big difference.

You may consider this parsimonious – but Orban is getting as little VAT from me as possible.

Regards

Charlie

Guest

Hungarian Property read the later posts.

Guest

or Maria

Ron
Guest

The HUF 150,000 is the monthly gross income. The total salary costs would be HUF 220,500 (HUF 150,000 plus various social security), but the net salary would be only HUF 98,250. This is the situation if you are single and no kids. http://www.hrportal.hu/index.phtml?page=berkalkulator&edt_brutto=150000&edt_elt=0&edt_gyerekek=0&edt_egyedulnevel=0&edt_kedvezmeny=0&edt_munkaido=40&btn_submit=+%DAjrasz%E1mol+%3E%3E+

Ron
Guest

The OECD has some very nice interactive charts, just select Hungary and play around. In general, Hungary is not moving anywhere.

http://www.oecd-berlin.de/charts/

Guest
London Calling! There is of course the widespread VAT (and other tax) avoidance that is going on in Hungary. So that ‘Median’ as suggested by others has to be taken with a pinch of salt but it is still very low, no doubt. I don’t see the E-tills bringing in the much-vaunted revenue either if my (dreadful) experience is typical. ************* O/T alert! Only in Hungary? – I have never experienced anything like this in England – never. My lawnmower disintegrated while I was trying to inadvertently reshape a lump of concrete hidden in my lawn near a perimeter wall. In England it would be easy to identify the model – then the spare-part numbers – then to order them online for delivery in a day or two. Not in Hungary. Three lawnmower shops would only order if you brought the parts in – only one said he had parts in stock – but I had to take the old disintegrated parts in. An online portal? Postal delivery? You must be joking! He sold me – at full/new spares price the required belt, blade mount and locking spindle key. But only after three trips to the store – and three… Read more »
Marcel Dé (@MarcelD10)
Guest

Bowen :

wolfi :
And many food prices are already higher in Hungary than say in Austria and Germany …

Wolfi, I saw a post on the Friends of Hungary Facebook site once which pointed out the exact same thing. It was comparing the price of a few basic food items in Spar (which is an Austrian chain). Of course, the same items in Hungary were more expensive than in Austria.

Hmmm, I disagree.

Raw, seasonal, local, ‘traditional’ food is cheaper in Hungary than in Western European countries, even in the center of Pest. What is not is 1) Pre-processed food – 2) Western-taste products – 3) Foreign products.

Of course, to benefit from this you must have time to cook (and time to go to the piac if you live in a city center)*. Otherwise you pay a premium, and yes this premium is probably higher than it is now in the West, where most people now shop in supermarkets for products of non-local origin and spend much more time watching TV than cooking.

(*) one shouldn’t forget that Hungary has one of the lowest women’s employment rate in the EU…

Guest

Goodness Ron – no wonder so many are leaving…..

Ron
Guest

CharlieH: Re. grass-mowers.

A few years ago I had a similar problem with a grass-mower, which I bought in the Bricostore. In the end of it I bought a new one in another store, but I did manage to write a complaint in the complaint book, which every shop needs to have. My suggestion is to write it in this book.

As to writing to the Tax Authorities, do not do this. In my experience you may end up to be prosecuted, especially if this shop owner is part of Fidesz. You want to take that risk?

You can go to the (European or Hungarian) Consumer Protection Agency.
http://www.magyarefk.hu/en.html
http://www.nfh.hu/en/

Guest

Marcel? are you being sexist? …Or am I in responding like this!

andy
Guest

TOP SECRET:

As we know the Hungarian Data is based on the Government Statistical Office’s published information.

Knowing this govenment full well, this is not raw data… Instead it has been.pre-cooked and pre-digested. aThe true data, if kept secretly at all, is locked up in heavy vaults. The material is sealed sealed, labeled TOP SECRET for 80 years…

No point duscussing the economic issues under these conditions.

You know it too –
The ‘economists’ here are flying by wire…

Ron
Guest

Marcel: one shouldn’t forget that Hungary has one of the lowest women’s employment rate in the EU…
CharlieH:Marcel? are you being sexist? …Or am I in responding like this!

This is not the mistake of the women, but the way the labor code and pregnancy leave is arranged in Hungary. and yes Hungary, like all former CEE countries.

First part-time job is in general not done, because legally it has not been arranged efficiently in the law.

Basically you need to work from 9-17. And if you have kids you need to bring the kids to school before 8.00am and have somebody collect them at 16.00pm. Furthermore, in the vacation the kids have at least 10 weeks vacation, but little during the school year

Secondly: Pregnancy in Hungary means that you stay at home for one year, and in case of twins six years. Money wise it is a very little that you get.

Guest

@Marcel:

You are rightr regarding the price and quality of the “piac” – but, as I’ve written before you also need things like milk and sugar and these are way more expensive in Hungary …
I do as Charlie does: bring butter in from Germany – the Irish butter (my wife really loves it) is maybe 1.30 € in Germany, local butter is cheaper.

And in Hungary: Just saw a Tesco ad for Kerrygold butter at 600 HUF – and it’s just 200 g, while in Germany we get 250 g in a package.

And the Hungarian butter is only good for cooking, it tastes like nothing …

Another example: Last summer (when all housewives started to do jams etc …) there was a price explosion for sugar in Hungary – only when Aldi and Tesco offered it cheaper (limited to 10 kilos per custumer …) did the price drop again. Something similar happened with the price of eggs …

PS:

You can’t live on potatoes and paprika alone – even the sunflower oil is more expensive here in Hungary, even though you see square miles of beautiful sunflower fields …
Somethings’s really rotten in the state of Hungary!

petofi
Guest

“I don’t see the E-tills bringing in the much-vaunted revenue either…”

Why should they? We have cancelled two, day trips to Balaton and one to the countryside simply because we don’t want to pay a one-week (minimum) highway toll–I’m sure others have done the same…

wpDiscuz