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Kopint-Datorg projects GDP growth of 2.8% in 2007

Analysis

Kopint-Datorg expects Hungary's economy to expand 2.8% in 2007 and consumer prices to rise 6.4%, the economic think tank said on Wednesday.

Kopint-Datorg has raised its CPI forecast from an earlier 5.8%, because of increases in transportation prices and prices set by local councils, said deputy-director Éva Palócz. Inflation is expected to peak around 8% in Q1 2007, then fall to 7% in Q2, 6% in Q3 and 4.1-4.3% by year-end. The National Bank of Hungary will start reducing the base rate in the second half of the year. Economic growth is expected to be boosted by a 10.5% increase in 2007, even more than the estimated 9.9% rise in 2006. Imports are expected to grow 6.2% in 2007, slowing from 6.5% growth in 2006. Kopint-Datorg says investments will increase 1% in 2007.

Personal consumption will decline 0.7% and public consumption will fall a marked 7%, even more than the think tank's earlier projection of 5%. Kopint projects real wages will fall 3.5%. Households will be able to put aside just 5% of their income as savings. Kopint-Datorg projects a current account deficit of €4.5 billion, equivalent to 4.6% of GDP. It projects a foreign trade deficit of Ft 1 billion. The general government deficit is expected to reach 6.9% of GDP in 2007, just one-tenth of a percent over the Finance Ministry's projection. Kopint-Datorg noted that the state must spend Ft 30 –40 billion less each month next year if it is to achieve this target. Kopint-Datorg now expects the forint to trade at an average 255 to the euro in 2007, firmer than the 266 exchange rate they projected in October. Kopint-Datorg estimates the forint's average rate against the euro will be 265 in 2006. (Mti-Eco)

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