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.
Hungarian GDP grew by 2 per cent in 2016, as predicted by GKI. GDP is expected to mount by 3 per cent or slightly more in 2017. The 20 per cent decline in investments in 2016 will be followed by a rebound of about 8 per cent in 2017 mainly due to the restart of the inflow of EU transfers, whereas the increase of consumption, which was very rapid last year, may accelerate slightly further. However, the growth rate of imports will be faster than that of exports, and the terms of trade will stagnate at best. Inflation is going to pick up. Although internal and external equilibria will deteriorate somewhat, they remain very favourable.
Following an increase of three months, the improvement of GKI’s economic sentiment index stopped in February. According to the empirical survey conducted by GKI with the support of the EU, business expectations did not change, consumer ones deteriorated somewhat. The GKI economic sentiment index has fluctuated in a relatively narrow band for three years, and like in January, at present, too, it is somewhere around the top of this band.
In January 2017, the Budapest and the Hungarian real estate market indices of GKI-MGYOSZ stood at +4 and +2 points respectively. The index figure in Budapest was slightly up (within the error margin), while the national index has increased 3 points. Compared to one year earlier, both indices went up 7 points.