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Strong Economic Growth Has Returned To Hungary, OECD Says

By Tamás Székely // 2016.05.09.

“Strong economic growth has returned” to Hungary, the Organisation for Economic Co-operation and Development (OECD) said in a recent report, putting GDP growth at 2.5% in 2016 and 3% in 2017. Macroeconomic imbalances are being corrected, public debt as a percentage of GDP is falling, the country is running a current account surplus and financial vulnerabilities have been reduced, the OECD said in its 2016 Economic Survey of Hungary.

The OECD noted, however, that non-performing loans still hamper bank lending in Hungary, income levels are still well below those in more advanced economies and, as economic slack disappears, sustaining growth will require structural reforms to strengthen the business sector and upgrade skills. Investment growth has started to pick up, supported by faster business capital accumulation as well as inward FDI and European Union funding.

But business investment is still “held back by frequently changing regulatory environment and entry barriers in network industries”, the report added. The OECD said that the education system has reacted slowly to labour market changes, leaving many graduates without needed skills. Training in public work schemes has not been effective enough in generating relevant labour market skills, it added.

The OECD Economic Survey of Hungary presents an upbeat picture of the country’s macro-economic situation, Economy Minister Mihály Varga said at the press conference held after the presentation of the document. The study is appreciative of the results of Hungarian economic policy: economic growth, debt reduction, the creation of jobs and measures aiming to mitigate the country’s exposure to external shocks, Mihály Varga pointed out.

Last week the European Commission said in its fresh spring European economic forecast it expected Hungary’s economy to grow by 2.5% in 2016 and 2.8% in 2017,  both up from EC’s 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 EC report noted.

via and MTI photo: