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Market analysts expect GDP growth under 4% in 2017

Analysis

Hungarian GDP growth will accelerate this year and the next, due to EU funds and increasing consumption generated by rising wages, which in turn will be fueled by the upcoming elections and labor shortages, says a study by economic research institute GKI.

Following GDP growth of 2.2% in 2016, economic expansion will accelerate to 3.8% both this year and the next, business news portal vg.hu cited GKI as predicting.

GKI also predicts growth in consumption of 4% and 3.5% for this year and the next, which will lead to an increase in imports greater than previously estimated.

Inflation will also grow but below the pace anticipated by the National Bank of Hungary (MNB), while the budget deficit will grow at an acceptable rate, albeit still high among EU countries, GKI notes. The decrease in the state debt may be higher than expected, while the trade surplus may get lower, it adds.

GKI observes that while the conditions necessary for long-term, sustainable GDP growth are now established, and indicators are favorable, there is no sign of this happening so far; on the contrary, it says opportunities are being wasted. An acute labor shortage adds to this, which GKI expects to continue in 2018.

In addition, notes GKI, it is unlikely that the MNB will change the base rate of 0.9% before the end of 2018, while it will continue using unconventional instruments to control currency rates.

Kopint-Tárki maintains GDP forecasts

Meanwhile, economic research firm Kopint-Tárki reiterated on Wednesday that it expects Hungarian GDP growth to reach 3.9% this year and 4% next year. The growth projections are unchanged from a previous forecast in October, national news agency MTI reports.

According to the firmʼs current report, inflation should be 2.3% this year and rise to 2.5% next year, said CEO Éva Palócz.

Exports could expand by 6.5% this year, instead of the previously forecast 6.8%. Imports could be up by 9.5% in 2017, compared to the 8.1% growth rate predicted in the firmʼs October report.

Personal incomes are rising but this is not yet reflected in consumption, although Christmas purchases could give a serious boost to consumer spending, said Palócz. Net real incomes should rise by 10% and consumption by 4% this year, she added.

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