EBRD lowers Hungary GDP forecast for 2014

MNB

The European Bank for Reconstruction and Development (EBRD) lowered its forecast for Hungary’s GDP growth this year to 1.6% in its latest Regional Economic Prospects report. The forecast was lowered from the 1.7% rate forecast in the last such report, published in January. The new paper chalked up the decrease in forecast due to Hungary’s medium-term growth potential “remain[ing] much diminished.”

The EBRD acknowledged “surprisingly brisk” GDP growth of 2.7% in Q4 of last year, but attributed the increase as mainly driven by domestic demand supported by one-off factors, such as government-mandated utility price cuts and disbursement of European Union funding at the end of the 2007-2013 European Union budget period.

According to the report, phase two of the National Bank of Hungary (MNB)’s Funding for Growth scheme, which makes low interest-rate credit available to SMEs, had “begun only slowly” and was “unlikely to overcome the underlying lack of investment demand.”

The EBRD projects growth of 1.2% for Hungary’s GDP in 2015.

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