Brussels, May 5 (MTI) – Hungary’s economy will grow by 2.3 percent of GDP in 2014 and by 2.1 percent in 2015, the European Commission said in its spring economic forecast released today.
The projection was raised from 2.1 percent in the EC’s winter forecast published in February. The new projection corresponds with figures in the government’s updated Convergence Programme submitted to Brussels at the end of April. Hungary’s budget deficit will come in at 2.9 percent of GDP this year and around 2.8 percent in 2015, under the 3 percent European Union threshold. It noted that the 2014 forecast assumed that extraordinary budget reserves equivalent to 0.3 percent of GDP would not be spent. State debt will fall to 79.5 percent in 2015 from this year’s 80.3 percent, according to the commission’s figures.
The EC said that domestic demand would be the “main driver” of growth in both years. It put investment growth at 7.0 percent in 2014 and 4.3 percent in 2015. It projected household consumption would rise by 1.4 percent in 2014 and 1.6 percent 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 percent in 2014 to 8.9 percent in 2015 because of a steady increase in the workforce participation rate.
The EC said average annual inflation would fall to 1.0 percent this year on the back of several waves of utilities price cuts. But it projected CPI would climb to 2.8 percent in 2015 as the negative output gap closes and the weaker exchange rate drives prices up. The EC included among risks to the forecast a weaker forint, a potential deepening of the Ukrainian crisis and a new relief scheme for households with foreign currency-denominated mortgages.