EC raises growth forecasts for Hungary

Banking

In a fresh forecast released today, the European Commission has raised its projections for GDP growth in Hungary to 3.6% for this year and 3.5% in 2018, according to Hungarian news agency MTI.

The projections for 2017 and 2018 were raised from 3.5% and 3.2%, respectively, in the ECʼs winter economic forecast, released in February. The EC publishes such forecasts three times a year.

The ECʼs projections are under the governmentʼs forecasts for GDP growth of 4.1% in 2017 and 4.3% in 2018.

The EC said growth this year and next year will be bolstered by a pickup in investments, lifted by European Union-supported projects, by added capacity in the manufacturing sector, and by higher household consumption, helped by an upturn in retail lending and positive labor market developments.

The EC noted the benefit to growth of government-initiated measures reducing corporate tax and payroll tax, while raising the minimum wage over several years starting in 2017.

The EC said domestic risks to the forecast are "broadly balanced." On the upside, companiesʼ adjustment to higher wages may be smoother than expected. On the downside, the pass-through of wage increases to prices may be higher and faster, triggering a monetary policy reaction, it added.

The spring forecast puts the general government deficit as a percentage of GDP at 2.3% in 2017 and 2.4% in 2018. The government targets deficits of 2.4% of GDP for both years.

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