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European Commission More Optimistic About Hungary’s GDP Growth

Tamás Székely 2017.11.10.

The European Commission (EC) has raised its projections for GDP growth in Hungary to 3.7% for this year and 3.6% for 2018 in its fresh autumn forecast.

The projections for 2017 and 2018 were raised from 3.6% and 3.5%, respectively, in the EC’s spring economic forecast, released in May. The EC publishes such forecasts three times a year. Hungary’s government targets GDP growth of 4.1% this year and 4.3% in 2018. The EC put Hungary’s GDP growth in 2019 at 3.1%.

The EC said growth this year is supported by private consumption and rebounding investment. Private consumption and household investment, supported by both government-initiated and market-driven wage increases, as well as a strong recovery in bank lending and further fiscal loosening is expected to lift growth in 2018; however, growth is set to slow in 2019 as capacity constraints emerge, it added. The EC warned that Hungary’s labour market is becoming “increasingly tight” and said price pressures are expected to grow over the forecast horizon.

The EC sees annual average inflation rising to 2.3% this year, 2.6% in 2018 and 3% in 2019, still within the National Bank of Hungary’s 3% +/- 1 percentage point target band. The EC projects that the budget deficit would rise to 2.1% of GDP this year and to 2.6% in 2018, before falling to 2.3% in 2019.

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