European Commission puts Hungary 2016 GDP growth at 2.1 pc

Budapest, February 4 (MTI) – The European Commission projects Hungary’s economy will grow by 2.1 percent this year and 2.5 percent next year in a winter economic forecast for all European Union member states released on Thursday.

The projection for this year was lowered slightly from 2.2 percent in the previous EC forecast released early last November. The fresh projection is under the government’s official target of 2.5 percent growth this year.

Growth this year is set to slow from an estimated 2.7 percent in 2015 because of a decline in the absorption of EU funding and a slowdown in external demand, the EC said, adding that partial compensation should come from a more than 3 percent increase in private consumption. Household spending should be boosted by a reduction in the personal income tax rate from 16 percent to 15 percent and the effect of an earlier government measure to convert retail foreign currency loans into forints, the EC explained.

The EC said consumption should “remain robust” in 2017, driving growth. A reduction in the bank levy and new central bank policies providing subsidised lending to SMEs should create a “friendlier lending environment”, while a reduction in the VAT rate for home construction gives impetus to the home market, it added.