European Commission raises GDP growth forecasts

MNB

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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 EC╩╝s spring economic forecast, released in May. The EC publishes such forecasts three times a year. The EC put Hungary╩╝s GDP growth in 2019 at 3.1%, according to MTI.

Hungary╩╝s 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 Hungary╩╝s 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 EC╩╝s GDP growth forecasts are closely in line with the EBRD forecasts, also revised recently.

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