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European Commission raises GDP growth forecasts

The European Commission (EC) has raised its projections for GDP growth in Hungary to 3.7% for this year and 3.6% in 2018 in a forecast released Thursday, Hungarian news agency MTI reported.

The projections for 2017 and 2018 were raised from 3.6% and 3.5%, respectively, in the ECʼs spring economic forecast, released in May. The EC publishes such forecasts three times a year. The EC put Hungaryʼs GDP growth in 2019 at 3.1%, according to MTI.

Hungaryʼs government targets GDP growth of 4.1% this year and 4.3% next year.

The EC said growth this year is supported by private consumption and rebounding investment. Private consumption and household investment, supported by both government-initiated and market-driven wage increases, as well as a strong recovery in bank lending and further fiscal loosening, is expected to lift growth in 2018; however, growth is set to slow in 2019 as capacity constraints emerge, it added.

The EC warned that Hungaryʼs labor market is becoming "increasingly tight" and said price pressures are expected to grow over the forecast horizon. The EC sees annual average inflation rising to 2.3% this year, 2.6% in 2018 and 3.0% in 2019, still within the 3% +/- 1pp target band of the National Bank of Hungary (MNB).

The EC projects the general government deficit will rise to 2.1% of GDP this year and 2.6% in 2018, before falling to 2.3% in 2019.

The ECʼs GDP growth forecasts are closely in line with the EBRD forecasts, also revised recently.