Wages increase by 14% in Hungary, with inflation at only 2.3%

Hungarians are seeing a major increase in their wages, with the average gross monthly salary now standing at 297,000 forints, or US$1,154. This represents a 14.4% increase compared to 2016 figures released by the Central Statistical Office (KSH). Inflation in Hungary is at just 2.3%. The bulk of the increase is connected to the 15% to 25% rise in the minimum wage, in large part within the public sector. But an equally important factor is the acute labour shortage in Hungary, which has necessitated wage increases in many areas of the economy, including in the service and hospitality sectors. Mihály Varga, Minister of the National Economy, predicts that it is realistic to expect wages to increase by an additional 40% over the next six years.

Due to the acute labour shortage, the Budapest Transportation Company has had to post ads on all of its buses, informing passengers of the benefits they can count on and a net starting salary of 200,000 forints if they decide to become a bus driver.

Hungarians employed in the financial sector, as well as in the fields of insurance, earn the highest incomes. The average monthly wage in these sectors is now at 574,000 forints, or US$2,226. The lowest earners, however, are those employed in humanities or social sciences research, in health care and education. In these areas, the average monthly salary is merely 179,800 forints, or US$697. Those who work for NGOs earn below average wages as well, currently standing at 250,000, or US$970.

Péter Virovácz, an analyst with ING, predicted that marked increases in the average wage will not only continue for the remainder of the year, but they are likely to exceed current predictions. He suggests that the increasingly acute labour shortage is the most important factor driving up wages to this extent. András Horváth, an analyst with Takarékbank, predicts that wages will continue to rise at current rates in 2018, thanks in large part to an additional 8% to 12% increase in the minimum wage, as well as the labour shortage.

That said, some analysts, including Gergely Ürmössy of Erste Bank, predict that inflation will rise in 2018 to 3.4%. Much of this will be due to a surge in consumer spending, due to rapidly increasing wages in many sectors, as well as the higher cost of producing goods and offering services.

There is little question that for the foreseeable future, Hungarian employees and professionals have the upper hand when it comes to competing job offers and negotiating with their employer.

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