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GKI sees little change in economy in 2018

MNB

Trends in the Hungarian economy in the first half of the year have continued in the past few months, and no substantial change can be expected until mid-2018, says a study by GKI Economic Research Co. It adds that the fastest-growing sector in the Hungarian economy will be construction in both 2017 and 2018.

Fueled by EU transfers and their budgetary advance payments, as well as the pre-election demand boost, the rate of economic growth has reached 3.8%, which is above the EU average but still among the lowest in the CEE region, a press release published by GKI shows.

While GDP growth is driven by investments, consumption is also rising fast. While the external and internal equilibria deteriorate slightly, and inflation accelerates, this is not a problem for the time being, GKI says, as trends are favorable in the short term; however, long-term solutions are still missing, according to its findings.

The fastest-growing sector in the Hungarian economy will be construction in both 2017 and 2018, says GKI. The sectorʼs output increased by 28% in the first eight months of this year, and is expected to grow by 25% in 2017 as a whole, as a result of the upswing at the end of last year, and by 10% in 2018.

Monthly fluctuations in industrial production remain significant, GKI adds. Although the expected annual growth rate of over 5% is much faster than last year’s near stagnation, it is still noticeably below its levels in 2014 and 2015. The main reason for this, says the research firm, is the termination of the driving force of the automotive industry.

The performance of foreign trade fluctuates, according to GKI. In the first eight months of 2017, the growth rate of imports in euro terms exceeded that of exports by more than 3 percentage points. As a result, the export surplus decreased by more than EUR 1 billion;  however, it is still quite impressive, totaling EUR 5.6 bln.

The foreign trade surplus will continue to drop in 2018 (from EUR 8.5 bln to EUR 7.7 bln), predicts GKI.

The growth rate in retail sales will be over 4% in 2017 and will remain slightly below 4% next year, the summary predicts. Consumption growth is expected to be about 3.5% in 2017 and between 3% and 3.5% in 2018, it adds.

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