The KSH noted that wages have been boosted by a higher minimum wage as well as pay increases in certain segments of the public sector and at state-owned public service provider companies. Excluding the 169,000 Hungarians in fostered work programmes in June, the average gross wage rose by 12.9% to 311,388 forints. Net wages stood at 207,073 forints.

The number of fostered workers was down from 218,200 in the same month a year earlier.

The gross wage growth in June of 14.4% and growth of 12.5% in the first half of the year chimed with the government’s expectations, the economy minister told public television after the release of the KSH data. Mihály Varga insisted that wages would continue to rise throughout the rest of the year, as would the employment rate.

Varga said the government strove to improve its long-term competitiveness, not through cheap labour, but by being part of a value-added chain.

Whereas government measures in the past few months have had a positive impact on wage growth, pay also rose thanks to continually higher demand on the labour market due to the strength of the economy, he said.

The economy ministry said that real wages had risen in an unbroken streak for four-and-a-half years. It added that wages in the private sector had risen in June at a rate unmatched over the past 15 years.

The June wage increase came as a positive surprise to analysts interviewed by MTI.

András Horváth of Takarékbank said he expected wages to increase by around 13% this year on average as a result of wage agreements and a central increase of minimum wages. Also, wages are being driven upwards due to a growing labour shortage. He expected wages to continue to increase in 2018 on the back of the labour shortage and a further 8-12% hike of the two bands of the minimum wage.

Péter Virovácz, chief analyst of ING Bank, also expected a fast-paced wage rise in the second half of the year. Pay may propel upwards even faster with increasingly tighter labour market, he added.

Gergely Ürmössy, chief analyst of Erste Bank, said that increasing domestic demand triggered by higher wages could further accelerate inflation in 2018, which he expected to average an annual 3.4%. A tight labour market, increasing wages and gradually improving consumer confidence all suggest that household consumption could contribute heavily to economic growth this year, he said.

Commenting on the data, the ruling Fidesz party said the data confirmed the continuing rise in wage levels. The 14.4% annual increase is the result of the Fidesz government’s continued tax reduction measures and wage hikes, the party said in a statement, adding that if it were up to the opposition, wages would have stagnated.

Republished with permission of Hungary Matters, MTI’s daily newsletter.

MTI Photo: Kovács Attila