MNB raises projections for household consumption, investments

MNB

MNB headquarters in Budapest (Image by Jessica Fejos)

The National Bank of Hungary (MNB) markedly raised its projections for both household consumption and investments next year in a quarterly report released today, according to state news agency MTI.

The MNB raised its forecast for growth of household consumer expenditures next year to 5.0% from 3.8% in the previous Inflation Report published in September.

“Looking ahead, a steadily dynamic rise in consumption is suggested by the positive developments in income, the pick-up in lending and the improvement in households’ assets,” the MNB said. “As a result, domestic demand may become increasingly important in the structure of economic growth,” it added.

The MNB raised its projection for investment growth to 11.2% from 8.3%. It said the decline in the relative price of capital and the low interest rate environment would encourage investments that boost productivity. Investments will increase in 2017 and 2018, following a decline in 2016, “driven by greenfield foreign direct investment and the public sector”, it added.

The main figures of the Inflation Report were released by the MNB after a policy meeting on Tuesday. It raised its projection for average annual inflation next year to 2.4% from 2.3% in the previous report released in September. A chart published with the data shows the 3% mid-term inflation target will be met early in 2018, rather than in the middle of 2018.

The central bank also raised the projection for GDP growth in 2017 to 3.6% from 3%. In its first forecasts for 2018, the MNB projects average annual inflation of 3% and GDP growth of 3.7%.

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