Economic research institute Századvég raised its projections for GDP growth in Hungary to 4.2 percent for this year and 3.4 percent for 2019 in a fresh forecast released on Tuesday.
The projections for 2018 and 2019 were raised from 4.1 percent and 3.2 percent, respectively, in a forecast released by the think-tank in March.
Századvég said the growth rate for this year would be lifted by consumption and investments.
Consumption is seen rising by 5.1 percent in 2018 and by 4 percent in 2019 on the back of rising real wages as opposed to rising household debt as in the pre-crisis period.
Hungary’s employment rate has caught up with the European Union average, but could be further lifted by rising consumption, Századvég said.
Investments are projected to rise by 12 percent this year and by 3.4 percent in 2019 thanks to both private and government investments, with the latter being financed in part by EU funds. The think-tank added, however, that due to a high base and the expected peaking of EU funding, investment growth was likely to slow in 2019.
Exports are projected to rise by 5.6 percent in 2018 and 5.1 percent in 2019. But since imports are seen rising to 6.2 percent this year, net exports are unlikely to contribute to the country’s economic growth in 2018. In 2019, on the other hand, imports are seen rising to 4.3 percent, with the trade balance expected to boost growth that year.
Inflation is set to rise to 2.6 percent next year and 3.1 percent in 2019 due to a weakening forint and rising oil prices. If the forint continues to weaken, inflation could stay above 3 percent, the institute added.
Századvég expects the central bank to stick to its loose monetary policy until the end of 2019,
adding, at the same time, that the chances of the bank tightening its policy would go up if the forint continues to weaken to the extent that it affects inflation.
The think-tank forecast the budget deficit at 2.0 percent of GDP for this year and 1.6 percent in 2019. The government’s deficit target is 2.4 percent of GDP for 2018 and 1.8 percent for next year. It targets economic growth of 4.3 percent this year and 4.1 percent next year.