Budapest, February 4 (MTI) – The Fiscal Responsibility Institute (KFI), a think-tank, projected that Hungary’s economy would grow by 2.2 percent in 2016 after growth of 2.9 percent in 2015, Balázs Romhányi, the head of the institute, said at a roundtable on Thursday.
In 2017 economic growth is likely to slow to 2 percent, even taking into account the effects of housing construction subsidies, VAT cuts for building and a faster drawdown of EU funding, Romhányi said.
Lower oil and raw material prices will override upward pressures on inflation. Growth in domestic demand and a weakening forint may push prices up but lower imported inflation and cheaper raw materials will act as offsets, he said. After a stabilisation in the price of raw materials, KFI expects steadily rising inflation, which should stabilise around the central bank’s target.
Hungary’s budget balance will deteriorate in the medium term as government spending “promises” over the past few months will eat into the budget’s sustainability, Romhányi said.