The GKI economic sentiment index did not change in April, thus it continues to reflect strong optimism. According to the empirical survey conducted by GKI with the support of the EU, in October expectations improved notably in the business sector, reaching their 16-month peak, whereas they declined considerably among consumers.
In April, the Budapest and the national real estate indices of GKI stood at 2 and 1 points, respectively. The index figure in the capital city has fallen modestly by 1 point. The national index has dropped slightly from January (within the error margin). Both indices went up 3 points compared to one year earlier.
It is said that “a magician never unveils its secret” but it turned out just the opposite in the February company survey conducted by GKI. Companies even disclosed how they evade the obvious cost increase due to the increase in the minimum wage. Important to note that Hungarian owned SMEs and large companies are overrepresented in the sample of companies with over 5 employees (931 answers) and foreign owned companies are less represented.
Primarily due to the statistical effects of the performance of investments that had been much lower than previously expected, GKI raised its GDP forecasts for 2017 to 3.2 per cent from 3 per cent. It is halfway between the projections of the IMF (3 per cent) and the EU (3.5 per cent), and it is lower than the expectations of the Hungarian government (4.1 per cent). As far as production is concerned, it will be boosted by construction, which has already been able to work off a large proportion of its decrease last year, and trade, which was already expanding rapidly last year. Growth can be projected in all sectors, with the exception of agriculture, where a “natural decline” can be expected after last year’s uptick. Inflation will accelerate. Although external and internal equilibria will deteriorate slightly, they remain favourable. No substantial improvement can be expected in the main factors determining long-term development (in terms of the functioning of institutions, maintaining specific regulations, neglecting market solutions, and starting real structural reforms). Although the government frequently emphasises the importance of competitiveness, it is no more than empty lip service.
The economic sentiment index increased in March 2017 for the fifth consecutive month. Although the monthly changes were not significant, the index reached its two-and-a-half-year peak. According to the empirical survey conducted by GKI with the support of the EU, the last time when business expectations were as favourable as now had been last summer, whereas consumer expectations were as favourable as now eleven years ago.