EBRD raises 2014 Hungary GDP forecast to 1.7 pc

Budapest, January 21 (MTI) – Hungary’s economic output is expected to grow by 1.7 percent this year, the EBRD said in a report released on today.

The European Bank for Reconstruction and Development raised its forecast from 1.2 percent “in light of the very substantial policy support to growth,” in reference to a central bank scheme to support lending to SMEs as well as rapid monetary easing.

The 2014 budget is based on an assumption of growth of 2.0 percent.

The EBRD noted that Hungary’s economy had grown at a faster clip than expected in the third quarter of last year on improved net exports, public investments and farm output.

A further round of cuts to household utility bills should leave Hungarians with more disposable income, it said, cautioning however that the “longer-term consequences for investment in the sector may well be negative”.

Commenting on longer-term trends, the bank said: “… we expect that the adverse legal, investment and financial environment have materially depressed trend growth.”

EBRD director Andras Karman said increasing the rate of investment is the most important precondition for central and eastern Europe to restart narrowing the gap with the rest of Europe after this process ground to a halt during the crisis.

Karman told a business conference organised by GKI Economic Research company that this would not automatically return to the rate where it stood before the crisis and the key to success is increasingly in an individual country’s economic policy.

In order to boost the ratio of investment to GDP, it is necessary to increase domestic retail savings as well as budget savings, Karman said. A predictable and investor-friendly business environment is needed to encourage direct investment, he added.

Average wage levels are lower in the region compared with the EU as a whole and also lower than in the periphery of the euro zone, but to take advantage this a more investor-friendly environment is needed, he said.

Photo: www.conferencerepublic.com

Source: http://hungarymatters.hu/