The new projection is the same as the one in the government’s updated Convergence Program submitted to Brussels at the end of April.
The EC put GDP growth in 2015 at 2.1%, the same as in the winter forecast.
The EC said that domestic demand would be the “main driver” of growth in both years. It put investment growth at 7.0% in 2014 and 4.3% in 2015. It projected private consumption would rise by 1.4% in 2014 and 1.6% in 2015 as real disposable income increases and employment prospects improve.
The EC said credit growth would remain “slightly negative” among households but turn “somewhat positive” in the corporate sector because of the National Bank of Hungary’s Funding for Growth Scheme.
The EC noted that Hungary’s unemployment rate had fallen in part because of an increase in the number of employed, supported by more fostered workers, Hungarian workers abroad and the whitening of the economy. It projected only a slight decline in the unemployment rate from 9.0% in 2014 to 8.9% in 2015 because of the steady increase in the workforce participation rate.
The EC said average annual inflation would fall to 1.0% this year on the back of several waves of utility price cuts. But it projected CPI would climb to 2.8% in 2015 as the negative output gap closes and the weaker exchange rate drives prices up.
The EC included among the risks to the forecasts a weaker forint, a potential deepening of the Ukrainian crisis and a new relief scheme for households with foreign currency-denominated mortgages.
The EC put the general government deficit in terms of GDP at 2.9% for 2014 and 2.8% for 2015, under the 3% European Union threshold. It noted that the 2014 forecast assumed that extraordinary budget reserves equivalent to 0.3% of GDP would not be spent.
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