Forecast for 2016-2017

eurohazThe 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.

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