The European Commission (EC) raised its projection for Hungaryʼs GDP growth this year to 3.7% in a fresh forecast yesterday. The projection was raised from 3.6% in the previous forecast released in November. The EC publishes such forecasts three times a year.
The ECʼs figure compares to the official Hungarian government forecast for GDP growth in 2018 of 4.3%. The EC forecasts 2019 GDP growth at 3.1%, compared to the government forecast of 3.8%, noted state news agency MTI.
The EC said Hungaryʼs economic growth will remain strong in 2018, lifted by private consumption and investments boosted by wage increases and a recovery in bank lending. It put corporate and public investment growth rates in the double digits, adding that this will raise import growth.
Growth is likely to slow in 2019 as the result of capacity constraints, particularly on the labor market, the EC said. Export demand growth could slow as the economic expansion in the European Union "matures," it added.
The EC estimated Hungaryʼs real GDP increased by 3.8% in 2017 on the back of strong domestic demand. Consumer confidence remained high and private consumption was supported by rapid wage rises and employment growth, while investment growth was raised because of EU-funded projects, it noted.
Hungaryʼs GDP rose 3.8% year-on-year in Q1-Q3 2017, the latest data from the Central Statistical Office (KSH) show.
The EC also predicted that inflation will reach 2.8% in 2018 and 2.9% in 2019, approaching the National Bank of Hungaryʼs 3% mid-term target. Inflation is expected to be broad-based, as energy prices rise and service price increases pick up on the back of strong wage growth, it added.