Hungarian research company expects growth to slow before accelerating next year

Budapest, October 10 (MTI) – Pénzügykutató expects Hungary’s GDP growth rate to slow to 2.2 percent this year from 3.1 percent in 2015 because of dropping investments, but accelerate to 3.0 percent next year, the economic research company said in a forecast released on Monday.

Performance in the first half of this year has made it clear that growth halts as soon as the inflow of EU funding stops, the researchers said. Investments will rise again as soon as EU funds open up next year and employment will continue to rise, they said.

Pénzügykutató expects investments to drop 10 percent in 2016 and rise from a low base next year.

Contracting investments will be partially offset by rising consumption as real incomes are seen to rise by 7.7 percent this year and 3.5 percent next year. Pénzügykutató calculated the real wage increases assuming annual average inflation of 0.3 percent this year and 2.1 percent next year.

The budget deficit will be 1.8 percent in 2016 and grow to 2.6 percent in 2017, still well within the 3 percent Maastricht criterion.

State debt as a percentage of GDP is forecast to drop to 74.0 percent by the end of this year and to 73.1 percent next year from 74.7 percent at the end of 2015.

The foreign trade surplus is expected to rise to a new high of 10 billion euros this year from 8.6 billion euros in 2015 and to drop only slightly in 2017. The current account surplus would reach a new peak at 6.5 billion euros in 2016 and drop to 6.1 billion euros in 2017 after reaching 3.7 billion euros last year.

The large external surpluses despite decreasing EU inflows reflect low private investments. Non-financial businesses have remained net savers, the researchers warned.

Source: MTI