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OECD More Pessimistic About Hungary’s GDP But Still Predicts 2,5 Percent Growth For Next Year


The OECD lowered its projection for Hungary’s GDP growth next year to 2.5% in volume terms in a forecast published on Monday from the 3.1% in the previous Economic Outlook released in June 2016. The OECD, however, improved its 1.6% summer projection for Hungary’s growth this year to 1.7% in the autumn edition of the World Economic Outlook.

In newly released data for 2018 the organisation is projecting 2.2% GDP growth in Hungary. László Balogh, economy ministry deputy state secretary, said the OECD’s predictions about quickerpaced economic growth for next year, consumption-fuelled domestic growth and higher EU financing are in line with the government’s expectations. Balogh said policy steps advocated by the OECD are similar to ones taken by the Hungarian government in the last five years. The government targets a higher economic growth rate in 2016 than the OECD, at 2.5% of GDP.

According to the OECD, in 2016 economic growth slowed because of a sharp reduction in public investment in infrastructure arising from the slower disbursement of EU structural funds at the beginning of the new funding cycle. Better credit conditions and higher lending activity are supporting business investment, especially in manufacturing, despite profits being squeezed by higher unit labour costs that resulted from declining productivity. Housing investments should also pick up along with higher subsidies and a recovery in housing loans. Private consumption sustained its brisk pace on the back of rising real incomes.

Consumption should continue to expand robustly as real incomes continue to increase, supported by lower personal income tax and VAT on selected goods. The private sector remains the main source of job creation, while the high level of enrollment in public work schemes is slowly coming down. Together with slower growth of the labour force, this has reduced the unemployment rate by almost 2 percentage points over the past year, to around 5%. Hungary’s public debt, calculated according to Maastricht rules, is likely to decrease from 75.1% of GDP in 2016 to 74.1% in 2017 and 72.8% in 2018, the OECD said.

via and MTI