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European Commission More Optimistic About Hungary’s Economic Prospects


Brussels expects Hungary’s economy to grow by 2.5% in 2016 and 2.8% in 2017 in its fresh spring European economic forecast, both up from the winter projection. Beside growing private consumption, investments are seen to drop less this year than thought earlier, and, helped by measures to boost the housing market and by more state investment, they will pick up faster next year than earlier forecast, the European Commission report said.

Following improvements in 2014 and 2015, the budget deficit is expected to stabilise at 2% of GDP “despite a significantly increased fiscal room”, the EC said, basing its forecast on a no-policy change assumption. In the winter report released in February, it forecast the ratio to stay at 2% this year before a slight drop in 2017. The EC forecast could not take into account the 2017 budget bill which was not released by its cut-off date. The 2017 budget bill submitted to parliament a week ago projects an ESA 2010 deficit of 2.4% of GDP.

After dropping 0.9 percentage points to 75.3% last year, Hungary’s public debt as a percentage of GDP will remain on a declining path, dropping to 74.3% at the end of 2016 and to 73% at the end of next year, “even though delays in the receipt of EU funds are assumed to have a debt-increasing effect throughout the forecast horizon”, the Commission said. The 2017-end figure was raised by 0.6 percentage points from the winter forecast.

Hungary has a good chance of keeping its economic growth rate above that of the European Union average, the economy ministry quoted Economy Minister Mihály Varga as saying. Speaking at a roundtable discussion with financial advisory services firm Global Capital in Budapest, Varga said Hungary was a highly attractive investment destination in central Europe, adding that the government would continue with its investmentfriendly economic policy to further encourage economic growth. The minister said the high reinvestment rate in Hungary, the country’s ability to attract R+D activities along with foreign companies’ growing optimism about the economy for 2016, demonstrated that domestic and foreign investors had taken note of the economy’s improvement.

Hungary has recently enjoyed one of the highest growth rates in Europe for both developed and developing countries, Forbes magazine reported last week. In recent years, instead of following an orthodox rulebook for crisis management, the Hungarian government adopted their own measures that were not necessarily market friendly, but have seemed to work for economic recovery in the long-term, the paper said.

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