European Commission projects 2.8 pc GDP growth in 2015, 2.2 pc in 2016

Brussels, May 5 (MTI) – Hungary’s economy is expected to grow by 2.2 percent next year, slowing down from 2.8 percent this year, the European Commission said in its Spring 2015 Economic Forecast released on Tuesday.

“Hungary’s real GDP grew by an impressive 3.6 percent in 2014, but is set to slow down to more sustainable levels of 2.8 percent in 2015 and 2.2 percent in 2016 as growth-supporting factors, such as a record EU funds absorption, lose strength,” according to the report.

The Commission said the budget deficit is expected to fall below 2.5 percent of GDP and it cited “the strong economic recovery and improvements in tax administration” among factors for improved revenues.

It also forecast falling employment. “In 2014, the unemployment rate decreased to a low of 7.7 percent and is forecast to decline further.” It is forecast to decline to 6.8 percent in 2015 and 6 percent in 2016, the report said.

Domestic demand is expected to remain the main driver of economic growth, but with a shift from investment to private consumption. New mortgage rules are expected to raise households’ real disposable income as banks will have to reimburse revenues considered to have been unfairly collected, it said.

Inflation in 2014 turned out to be flat. In the second half of 2015 inflation is expected to turn positive. As the output gap closes, inflationary pressures from the real economy will drive up inflation to 2.5 percent in 2016, the Commission said.

Lending flows and investments could be further supported by a full take-up of the central bank’s lending for growth scheme as well as by the full implementation of the announced policy commitments towards the financial sector. Sunday closure of retail stores could lower consumption for a short period, according to the report.

With the assumed re-strengthening of the forint and unchanged state deposits, the debt ratio is forecast to decline by more than 1 percentage point annually in both 2015 and 2016, decreasing to below 74 percent of GDP by the end of 2016.

Source: http://mtva.hu/hu/hungary-matters