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Hungarian Economy Ministry Envisions 4,1 Percent GDP Growth Next Year

Economic growth in Hungary will pick up to 4.1% next year, while the budget deficit will remain below 3% and return to a falling trend thereafter, the economy ministry said in its fresh macroeconomic forecast published on Tuesday.

This year’s EU-conform budget deficit is now forecast at between 2.1% and 2.3% of GDP, below the original 2.4% target but over the recently revised 1.7%-of-GDP target announced in November. The deficit ratio would rise to 2.4% in 2017 from where it would gradually fall to 1.2% by 2020. The ministry raised its growth forecast from 3.1%, citing the six-year wage agreement signed in November. It said it expected a slight acceleration in the growth rate in 2018 to 4.3%. The ministry put this year’s growth at 2.1%, revising the earlier government forecast down from 2.5%. Hungary’s GDP rose by an unadjusted 2.0% in the first three quarters of 2016. GDP growth would gradually slow to 3.8% in 2019 and to 3.7% in 2020, the Ministry said. When preparing the forecast, the ministry assumed a 9% corporate tax rate and an unchanged revenue from the so-called extraordinary bank levy from 2017 throughout to 2020, among others. The ministry left the official forecast for annual average inflation unchanged at 0.4% for 2016. It projects the rate to accelerate to 1.6% next year before rising to 3.1% in 2018.

Meanwhile the National Bank of Hungary (MNB) also upped its 2017 GDP growth forecast in its fresh Inflation Report published on Tuesday. Now MNB forecasts 3.6% growth from 3% predicted three months earlier. The central bank also raised its 2017 inflation forecast slightly, putting next year’s annual average inflation rate at 2.4%, up from the 2.3% rate projected in September. MNB left its 2016 projections unchanged, putting inflation at 0.4% and economic growth at 2.8%. The bank released a forecast for 2018 for the first time, projecting an average inflation rate of 3% and a 3.7% growth rate. The fan chart published on Tuesday indicates that the central bank expects CPI to rise and exceed 2% early next year and to reach the bank’s 3% midterm target early 2018 rather than in the middle of 2018 as predicted in September. MNB interprets the target within a +/-1% tolerance band.

MNB’s inflation forecast is the same as the Economy Ministry’s for 2016 but is higher for 2017. MNB was more optimistic than the Ministry as to GDP growth for 2016 but raised its growth forecast more cautiously than the ministry did for 2017.

via hungarymatters.hu and MTI