GKI predicts 2018 GDP growth close to 4%

Analysis

The GDP growth of 4% seen last year may be repeated this year, according to research institute GKI. While the 17% increase in investments in 2017 will slow down to about half that amount this year, GKI says the rise in consumption of over 4% will be maintained.

In 2017 the Hungarian economy expanded faster than expected, by 4%. Although this rate is much higher than the EU average of 2.6%, it is only moderate in the CEE region, notes GKI in a press release.

Although developments in the general government budget differed significantly from those envisaged in the budget in 2017, there was no review of the 2018 budget. As a result, probably the third highest deficit in the EU (2.4% of GDP) is planned in Hungary in 2018, without sufficient reserves for the future, says GKI.

The expansion of EU transfers to the Hungarian economy and the purchasing power of households will slow markedly in 2018, says GKI, although their rate of increase remains fast. As a result of this, the growth rate in investments will be roughly halved. This will primarily affect public investments, which increased by nearly 60% in 2017.

The growth rate of the business sector will not reach its 2017 figure of 14% either, predicts GKI. The growth in gross earnings, meanwhile, will also slow significantly, from 13% in 2017 to 7% in 2018.

Although the minimum wage will increase by “only” 8% in 2018, after 15% last year, exerting a smaller impact on wage increases this year, labor shortages and the election year will still have significant effects, GKI says.

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