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IMF More Optimistic About Hungary’s “Very Well Performing” Economy

Tamás Székely 2016.02.17.

“The Hungarian economy is performing ‘very well’ and its vulnerability to shocks has declined substantially”, the IMF said in a fresh report. “Solid growth and a sharp reduction in unemployment are largely due to supportive macroeconomic policies, a favourable external environment and high utilisation of EU funds”, the International Monetary Fund highlighted in the document.

The [Hungarian] economy is growing at a robust pace and vulnerabilities have declined. (imf.org)

Output growth is projected to moderate slightly this year owing to the expected deceleration in the uptake of EU funds. Headline inflation is expected to remain low on account of low import prices and slowly reach the 3% target as food and energy prices recover and the labour market tightens, the report said, adding that the current account has been in record surplus while external debt—especially FX-denominated —and gross public debt have continued their downward path. The IMF said Hungary is now less vulnerable to external shocks, though it gave warning that financing needs remain high and an abrupt sharp deterioration in global or emerging market risk perception could lead to capital outflows. More needs to be done to further reduce vulnerabilities, especially given the fragile external environment, and to transition to growth driven by a vibrant private sector, it added.

International organisations are finally recognising the Hungarian economy’s improvement, the Hungarian Economy Minister said in response to the IMF report. Mihály Varga also noted that on Monday Morgan Stanley said Hungary improved the most in the region since 2008 in terms of reducing its vulnerability. The Economy Minister said the Hungarian government will look to significantly reduce last year’s 750 billion-800 billion forint (EUR 2.4bn-2.6bn) budget deficit this year. Varga said the ministry is in the process of preparing a “balanced budget” with zero deficit for 2017.

via imf.org and hungarymatters.hu