The European Commission (EC) raised its projection for Hungaryʼs GDP growth this year to 4.6%, up from 4.4% previously, in a quarterly forecast released on Thursday. The ECʼs 2019 forecast is in line with predictions from both the EBRD and IMF.
The governmentʼs official projection for GDP growth this year is 4.0%, although Minister of Finance Mihály Varga has indicated that higher-than-expected first-half growth of 5.1% could lift full-year growth to 4.3-4.4%.
The EC left its forecast for next yearʼs GDP growth unchanged at 2.8% (compared to the EBRDʼs 3.1%, and the IMFʼs 3.3%). It put GDP growth in 2021 at 2.8% (compared to the IMFʼs 2.9%).
The EC acknowledged in its autumn European Economic Forecast that Hungary had managed to withstand the global slowdown thanks to a domestic construction boom and a revival of the automotive industry. However, it noted that support from these factors is “set to fade toward the end of 2019,” augured by a slowdown in construction industry growth and contracting order books.
The EC projects private consumption growth will slow from 4.9% in 2019, to 3.8% in 2020, and 3.4% in 2021. Household consumption is set to “slow gradually” as lower GDP growth limits labor demand and constrains further real income gains, it added.
The EC sees investment growth plunging from 17.0% in 2019, to just 2.1% in 2020, and 2.6% in 2021. Public investment is set to fall after Hungaryʼs absorption of European Union funds peaked in 2019, it noted, while adding that private investment is seen rising further as real estate projects already in the pipeline and several big manufacturing sector investments are completed.
The EC forecasts the consumer price index, harmonized for better comparison with other EU member states, will decline from 3.4% in 2019, to 3.1% in 2020, and 3.0% in 2021.
The EC projects the general government deficit, relative to GDP, will narrow from 1.8% in 2019, to 1.0% in 2020, and 0.8% in 2021.
The EC publishes economic forecasts for member states four times a year, but the forecasts published in summer and winter only cover GDP and inflation.