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EBRD: Hungary’s GDP Growth Remains “Respectable” Despite Potential Slowdown

2015.05.15.

Hungary’s economic growth is likely to slow from 3.6% last year to “a still respectable” 2.5% or so this year and next, the European Bank for Reconstruction and Development (EBRD) said. One-offs such as the rapid disbursement of EU funds will no longer boost Hungarian growth,  EBRD said in its latest report.

The EBRD bumped up its growth projection for 2015 by 0.2 percentage points compared with its January forecast. It now expects 2.3% growth in 2016. These growth rates are still in excess of estimates for trend growth, given a history of weak investment, it added. In 2014, industrial output and export volumes grew markedly, up by 7.1% and 4%, respectively, though there was a clear slowdown late in the year and in the first quarter of 2015. Nevertheless, further gains in employment and strong real wage growth now underpin growth in domestic consumption, it said.

In the opinion of the Hungarian Economy Ministry the outlook of Hungary’s economic growth will even be better than predicted by the EBRD, as GDP growth will reach 3.1 percent in 2015. SME credit schemes and the low interest rate environment will also add to investment growth. The massive scaling back of funding in the EU will remain, but consumption will contribute to economic expansion, thanks to household disposable income growth, falling oil process and the refund of some HUF 1000bn for former forex borrowers. The economy ministry pointed out in its response to EBRD’s report that  both the IMF and the European Commission had raised their growth projections for this year in their spring reports.

via ebrd.com, hungarymatters.hu and kormany.hu photo: flickr.com