City analysts upgrade growth forecast on VAT cuts, EU funds and base effects in Hungary

London (MTI) – London-based emerging markets analysts have substantially upgraded their growth forecasts for Hungary’s economy, citing support from VAT cuts, strong EU funds absorption, loose monetary policy and favourable base effects.

In a report highlighting key findings of a recent visit to Hungary, released in London on Wednesday, analysts at BofA Merrill Lynch Global Research, the London-based research unit of Bank of America-Merrill Lynch said they had revised up their 2017 GDP forecast to an above-consensus 3.5 percent from 2.6 percent, “in view of significant fiscal stimulus and the EU funds pipeline, as well as easy monetary policy”.

“The government paid out around 1.8 percent of GDP in December 2016 after running a budget surplus in Jan-Nov 2016. Most of this money represents stimulus for 2017”.

This came on top of VAT, social contribution and corporate tax cuts, and minimum wage hikes approved for this year.

Preparation for EU funds absorption is also very advanced, well ahead of regional peers.

A weaker-than-expected GDP outcome in 2016 provides a favourable base effect, Bank of America-Merrill Lynch’s economists said.

“We feel more constructive about the CE3 (Hungary, Czech and Poland) growth outlook for 2017 in view of the progress on EU funds absorption. The situation is most upbeat in Hungary”, they added.

Source: MTI