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.
After its 2 per cent increase in 2016, Hungarian GDP is expected to grow by around 3 per cent in 2017. The significant decline in investments in 2016 will be followed by a noticeable growth in 2017 mainly due to the restart of the inflow of EU transfers, while the increase of consumption, which was very rapid last year, will continue similarly. However, the growth rate of imports will only be 2 percentage points faster than that of exports, and the terms of trade will stagnate at best. Inflation is going to pick up. Although economic indicators are expected to be favourable for 2017, there are no signs of any preparation for the post-2020 period following the phasing out of EU transfers.
In January 2017, the GKI economic sentiment index has improved for the third consecutive month, approaching its level of a year ago. According to the empirical survey conducted by GKI with the support of the EU, business expectations reached only their level in the summer of 2016, whereas consumer expectations were more favourable than today last time only in February 2006, i.e., eleven years ago. The GKI economic sentiment index has fluctuated in a relatively narrow band for three years, and now it is somewhere around the top of this band.
The Hungarian economy is essentially proceeding on a path indicated in September. Owing to the fall in EU transfers, GDP growth in Hungary slowed down to 2 per cent 2016. It is expected to accelerate to around 3 per cent in 2017 due to the rise in EU transfers and accelerating growth in consumption. As a result of the significant wage increases in 2017, growth in consumption will be 5 per cent, that is, 1 percentage point faster than previously expected. Inflation will also pick up in 2017, from 1.5 per cent to 2 per cent. However, the situation of the general government in 2016 is much more favourable than previously thought, in part due to one-time revenues. Although the government realised that GDP growth based on cheap labour was sputtering, economic competitiveness was deteriorating, and Hungary became excessively dependent on EU transfers, the government failed to revise the Hungarian model. Thus, we can only expect some temporary improvement rather than genuine changes, and the using up of EU transfers and the lagging behind the CEE region will continue.
After November, the GKI economic sentiment index rose again in December. According to the empirical survey conducted by GKI with the support of the EU, business expectations increased slightly, whereas consumer ones went up more strongly, reaching their ten-year peak (being almost at their level of April 2006). The GKI economic sentiment index has fluctuated in a relatively narrow band for three years, and now it is somewhere around the top of this band.