European Commission sees stable growth in Hungary

Brussels, November 5 (MTI) – The European Commission sees Hungary’s economic growth at 2.9 percent this year, at 2.2 percent next year, and at 2.5 percent in 2017, according to the European body’s autumn forecast published on Thursday.

Hungary will have a budget deficit of 2.3 percent this year, 2.1 percent in 2016 and 2.0 percent in 2017, the report said.

The country’s public debt will amount to 75.8 percent of GDP this year, 74.5 percent in 2016 and 72.6 percent in 2017, according to the EC forecast.

Private consumption and external demand are both expected to drive growth over the forecast horizon, the EC said, noting the positive impact on household spending power of low inflation, high nominal wage growth, compensation from lenders, a planned 1 percentage point cut in the rate of the personal income tax and strong labour market performance.

The EC puts export growth at 7.7 percent in 2016 and 8.0 percent in 2017.

Hungary’s unemployment rate is expected to fall close to 6 percent by 2017, although the EC noted that employment gains are due not only to private sector activity but an expansion of state-sponsored fostered work programmes.

The EC said overall risks to the growth outlook were on the downside. It acknowledged the possible impact of an escalation of the Volkswagen crisis and the slowdown in China and other emerging market economies, but it said steps to wean SMEs off subsidised loans could improve lending conditions and improve growth, and the recent conversion of FX retail loans into forints might raise households’ propensity to dip into their savings, boosting consumption. The arrival of asylum seekers does not fundamentally affect the country’s macroeconomic outlook, the EC added.