GKI sticks to 3.8% GDP growth forecast for 2018


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Economic research institute GKI has left its projection for this yearʼs GDP growth unchanged at 3.8% in a fresh forecast, well below the governmentʼs official forecast of 4.3%. At the same time, GKI expects rising inflation and decelerating investments in 2018.

GKI estimates the same 3.8% figure for GDP growth in 2017, according to its latest forecast, noting that the figure exceeds the EU average of below 2.5%, but is only moderate in regional comparison.

The researcher sees industrial output climbing 5%, down from an estimated 5.5% growth in 2017, highlighting the stagnation of the automotive sector in the past two and a half years as a downside risk.

Stressing that there can be no repeat of the almost 30% expansion of the construction industry in 2017, GKI expects the sector to expand by a more modest 10% in 2018.

Investments are set to climb 9%, slowing from an estimated 20% in 2017, according to GKI.

Retail sales growth is also seen decelerating to 4%, from an estimated 5% growth in 2017.   

Average annual inflation will approach 3% in 2018, the National Bank of Hungaryʼs mid-term target, according to GKI.

The general government deficit (excluding local governments) reached almost HUF 2 trillion in 2017, due to what GKI terms the "erratic arrival of EU transfers and the high amount of budgetary advance payments to beneficiaries." The deficit in proportion to GDP, calculated by the EU methodology, was around 2%, lower than envisaged but higher than the expected 1.2% average across the EU. This year GKI estimates the deficit in public finances to shrink to half of the 2017 figure, to around HUF 1 tln.

GKI estimates that unemployment may have fallen to below 4% in the last quarter of 2017, and expects a jobless rate of 3.8% this year. At the same time, it stresses that companies it has surveyed – particularly in the industrial sector – regard labor shortages and the lack of skilled workers in particular as the main obstacle to growth.

Gross average wages are forecast to grow by at least 7% in 2018, and real incomes by 4-5%. An 8% increase in the minimum wage, significantly lower than last yearʼs 15%, will exercise reduced pressure on wage hikes in general, GKI says.

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