Hungary’s GDP forecast for next year has been raised to 2.4% by the OECD in its projection published today, up from 2.2% in the previous outlook released in June, while GDP is expected to be around 3% this year and at 3.1% in 2017.
“Economic growth was strong in 2015 but is projected to slow in 2016 as public investment declines and the fiscal stance becomes less accommodative,” the OECD said, according to a report by Hungarian news agency MTI. “Activity should rebound in 2017 on the back of renewed public investment. Private demand should remain fairly robust over the coming two years,” OECD reportedly added.
OECD expects investments to fall by 3.2% next year as a result of lower disbursement of European Union funding at the start of the new funding cycle, before recovering to 0.8% growth in 2017, MTI reported. However, OECD projected private consumption growth picking up from 3.0% in 2015 to reach 3.2% in the following two years, MTI added.
According to OECD, domestic risks for the growth forecast were mainly on the upside, while downside risks were mostly external. With a concentration of automotive companies in its industrial sector, Hungary is vulnerable to fallout from the recent diesel engine rigging scandal; also, a faster-than-expected normalization of monetary policy in the United States could force the National Bank of Hungary (MNB) to tighten its own policy rate earlier than expected, OECD said, according to Hungarian news agency MTI.
According to the news agency, the OECD projects Hungaryʼs general government deficit as a percentage of GDP will narrow from 2.3% in 2015 to 1.9% next year and 1.5% in 2017, all well under the 3% Maastricht threshold. The ratio of state debt to GDP is set to fall to 74.6% in 2016 and 72% in 2017.