OECD Sees Moderate Recovery Continuing In Hungary

Budapest, May 6 (MTI) – The OECD projected a “moderate recovery” would continue in Hungary in a fresh economic forecast published today.

“The moderate recovery is projected to continue, based on robust export growth and a gradual acceleration of private investment,” the Organisation for Economic Co-operation and Development said.

“[Private investment] will nonetheless continue to be hampered by an uncertain business environment related to controversial domestic policies and tight credit conditions, which have been alleviated only partly by the central bank’s Funding for Growth Scheme and by its low policy rate,” the think-tank of advanced countries added.

The OECD projected Hungary’s economy would grow by 2.0 percent in 2014, unchanged from the forecast in the previous Economic Outlook published last November. It put GDP growth in 2015 at 1.6 percent.

The OECD expects Hungary’s unemployment rate to reach 8.7 percent in 2014, then edge up to 8.9 percent in 2015.

It put the general government deficit at 2.9 percent of GDP in both 2014 and 2015.

It sees average annual inflation accelerating from 0.5 percent in 2014 to 2.8 percent in 2015.

The OECD warned that the National Bank of Hungary’s policy makers would have to balance the benefits of further rate cuts against the “more acute risk of an abrupt depreciation of the forint”.

“Restoring credit growth on a more permanent basis will require a better operating environment for banks and further cleaning up of their balance sheets,” it added.

The NBH is thought to be nearing the end of an easing cycle started in August 2012. Rate-setters have slowed the pace of cuts recently, but a statement by the central bank’s rate-setting Monetary Council late in April did not appear to point unequivocally to an end to looser monetary policy.

The OECD stressed Hungary’s vulnerability to turbulence in global financial markets and said a further depreciation of the forint would make more difficult the servicing and rolling over public and private debt, much of which is denominated in foreign currency or foreign held.

It also said growth could be weakened by the unfolding of events in Ukraine.

“On the upside, a better operating environment for private firms, notably banks, would spur investment and growth,” it added.

Source: http://mtva.hu/hu/hungary-matters