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MFB forecasts 3% GDP growth for 2011

The Hungarian Development Bank (MFB) projects Hungary's GDP growth will accelerate to 3% in 2011 from 0.9% in 2010.

The government forecasts GDP growth of 0.6% in 2010. The IMF projects the same rate.

The MFB sees annual average inflation falling to to 3.5% in 2011 from 4.8% in 2010. It puts the central bank base rate at 5.25% at the end of 2010, unchanged from the present rate, and at 5% at the end of 2011.

The annual average exchange rate of the forint is predicted to strengthen from 277 to the euro this year to 271 in 2011, the annual average forint/dollar rate to strengthen from HUF 208.3 to the dollar to HUF 202.2 in 2011, and the annual average forint/Swiss franc rate to weaken from HUF 196.5 to the franc to HUF 202.2.

GDP growth in the euro zone is projected at 1.5% this year and at 1% in 2011, and annual average inflation is seen at 1.5% this year and 1% next year.

MFB acknowledges the results of government measures taken towards fiscal consolidation. It also noted, however, that the stabilisation is a necessary, but not a sufficient condition to long-term growth, for which the outlook is fairly uncertain in Hungary as well. Of the components of growth, only net exports increased in the first two quarters of 2010, with consumption and investments yet to pick up.

Answering a question regarding the impact of the two economic action plans, MFB senior economist Erzsébet Gém said that only the conditions of the macroeconomic path are known, while many of the detailed measures affecting the real economy and the budget remain unknown. With the tight budgetary situation, a shortage of government development funding is likely. The government plans to regroup what is still available from EU funding to support businesses. How efficiently this will be utilised will depend on how the SME sector will absorb development funding.

On the revenue side, the tax measures announced by the government could constitute the basis for growth, Gém said, as they can help to pick up consumption, thus increasing domestic demand. (MTI-Econews)