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OECD predicts 4.4% GDP growth in Hungary this year

In its biannual Economic Outlook released on Wednesday, the Organisation for Economic Co-operation and Development (OECD) has raised its GDP growth forecasts for Hungary both for this year and 2019, state news wire MTI reported.

The OECD has raised its forecast for this year to 4.4%, up from 3.6% in the previous Economic Outlook released in November. It also raised its forecast for next yearʼs growth from 2.8% to 3.6%.

Hungaryʼs government projects GDP growth of 4.3% in 2018 and 4.1% in 2019, MTI noted.

In a country note, the OECD said robust domestic demand, supported by wage increases, rising employment and buoyant consumer confidence, is driving growth in Hungary. It noted "clear signs" of the labor market overheating, and said expansionary fiscal and monetary policy "should become more restrictive."

"Deregulation and a variety of competitiveness-enhancing measures would contribute to an improved business environment and could bolster productivity growth, facilitating Hungaryʼs integration into global supply chains," it said, adding that the country remains vulnerable to any shock in demand for vehicles in Germany, its main export market.

The OECD put a faster-than-expected pick-up in wages, eroding cost competitiveness and unhinging inflation expectations among the downside risks to its growth forecast.

On the upside, faster-than-expected productivity gains from investments would bolster the economyʼs capability to absorb rapid wage gains, it added.

On Monday, Hungarian economic research institute GKI also raised its GDP growth forecast for this year, but to a much lower rate than the OECD, to 4%.