Due to the decrease of EU transfers and hence public investments, the deceleration of GDP growth in the first quarter of 2016 could have been foreseen. Nevertheless, in the light of the investment restraining effects of the Hungarian model that had been at work for six years the slowdown proved to be unexpectedly spectacular. In addition, in some segments of industry sales problems appeared in the first quarter.
The GKI economic sentiment index stagnated both in May and June. According to the empirical survey conducted by GKI (www.gki.hu) with the support of the EU both busi-ness and consumer expectations declined in June compared to May; however, changes were within the statistical margin of error, particularly in the case of consumers.
In the first quarter of 2016 only the GDP growth rate of Greece was slower than that of Hungary. Because of this data, which was worse than expected, GKI lowered its growth forecast for 2016 from 2.3 per cent to 2 per cent; however, the actual growth rate can be even lower than this. Owing to the fall in construction, the decline in investments will be more significant, around 8 per cent. However, due to the rapid increase in earnings, the expansion of consumption may be 3.5 per cent.
The decline of the GKI economic sentiment index, which started in January 2016, stopped in May, and it even slightly increased. According to the empirical survey conducted by GKI (www.gki.hu) with the support of the EU, the business confidence index remained unchanged compared to April. However, consumer expectations almost reached their peak value this year.
In April 2016, the Budapest and the Hungarian real estate market indices of GKI-MGYOSZ were higher than in the previous quarter, in both cases by almost 2 points. The former index was 5 points higher than a year ago, the latter one by 3 points. The index figures represent a 41-quarter peak for Budapest, and a 37-quarter peak for Hungary.