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EBRD: Hungary’s growth decelerating but manageable

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Hungaryʼs economic growth is likely to decelerate further from the 3.6% achieved last year, to what is being dubbed "a still respectable" 2.5% on average in both 2015 and 2016, the European Bank for Reconstruction and Development (EBRD) said today, according to state news agency MTI.

In its regional overview released in London at the beginning of the annual meeting of its investor countries and institutions, the bank said that last year temporary factors, such as the rapid disbursement of EU funds towards the end of their availability, will no longer positively affect growth in Hungary.

The EBRD expects Hungaryʼs economy to grow by 2.6% this year, 0.2 percentage point higher than its previous forecast released in January, and by 2.3% in 2016, saying that given the long history of weak investment, these growth rates are still in excess of estimates for trend growth.

In 2014, industrial output and export volumes grew substantially, by 7.1% and 4%, respectively, however, there has been a clear deceleration late in the year, as well as in the first quarter of 2015.

Nevertheless, further gains in employment, and strong real wage growth underpin growth in domestic consumption. Inflation has remained in negative territory since the third quarter of last year, and has given further room to move to the central bank, which has cut interest rates once again.

In addition, the central bank has expanded its program of subsidized lending to smaller SMEs. This program will likely contribute 3% of GDP in funding to Hungaryʼs corporate sector, the EBRD said.

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