Budgetary advance payment of EU transfers increased sharply

In Hungary, the faster than expected GDP growth in the first quarter of 2017 was followed by a slight slowdown in April and a pick-up in May. GDP growth is expected to accelerate to around 3.5 per cent in 2017 from 2 per cent in 2016, primarily as a result of investments rising this year, whereas they declined last year. Although external and internal equilibria will deteriorate slightly in 2017, and inflation will accelerate, these trends are acceptable in the short term.

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Forecast for 2017

The Hungarian economy grew by 4.2 per cent in the first quarter of 2017, by a rate not foreseen by anybody. A growth rate higher than this one has been recorded only once since 2007. This high rate was due in part to the low base. The Hungarian growth rate was much higher than the EU average; however, it was not outstanding in the CEE region. The growth rate in Romania and Slovenia was more than 1 percentage point higher than in Hungary, and the economic growth of Poland and the three Baltic countries was also more dynamic. Data indicate a deterioration in Hungary in April, and the fall in the performance of agriculture will be significant in 2017. The growth rate of consumption is expected to accelerate in 2017, whereas a sharp slowdown in investments can be anticipated. Therefore, GKI raised its growth forecast for 2017 from 3.2 per cent to only 3.5 per cent, although it is possible that the rate will be slightly higher. Although external and internal equilibria will deteriorate slightly, and inflation will accelerate, these trends are acceptable in the short term. It is important for the medium-term course of the Hungarian economy that after the German elections the deepening of the integration of countries willing to work in close cooperation will be on the agenda in the EU. This can push Hungary to the periphery of the EU. At the same time, Hungary will less likely be able to rely on EU transfers of crucial importance.

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Growth faster than expected

In the first quarter of 2017, Hungarian GDP expanded by 4.1 per cent, faster than expected. Therefore, GKI revised its growth forecast upwards to an annual growth rate of at least 3.5 per cent before gaining detailed data. Construction and industry grew faster than previously thought, whereas the growth rate of trade was slower. This is particularly surprising in the light of extremely fast increase in wages.

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Forecast for 2016-2017

elorejelzes_3Hungary’s GDP growth has been low in 2016 compared to other countries in the CEE region or to its growth rate in the previous year. However, some acceleration of the growth rate can be expected in the second half of the year. GKI maintains its GDP growth forecast of 2 per cent for 2016. Internal and external equilibria are very favourable, and inflation almost ceased.

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Forecast for 2016

lajharDespite the numerically similar projections for economic trends in 2016, there are still huge differences in the interpretation of these figures. The government envisions sustainable growth and catching up with Austria in the foreseeable future. GKI, however, can only observe partial successes
and continuous lagging behind the CEE region. In recent months the present Hungarian government continued the completion of the model by passing market economy, legal certainty and transparency. Anti-EU attitudes reached a new, more manifest phase. Read More …