BUDAPEST: The European Commission (EC) expects Hungary’s GDP to grow by 2.5 percent in 2016 and 2.8 percent in 2017 in its fresh spring European economic forecast released here the other day both up from the winter projection.
Beside growing private consumption, investments are seen to drop less this year than thought earlier, and, helped by measures to boost the housing market and by more state investment, they will pick up faster next year than earlier forecast.
Following improvements in 2014 and 2015, the budget deficit is expected to stabilize at 2 percent of GDP “despite a significantly increased fiscal room”, the EC said, basing its forecast on a no-policy change assumption. In the winter report released in February, it forecast the ratio to stay at 2 percent this year before a slight drop in 2017. The EC forecast could not take into account the 2017 budget bill which was not released by its cut-off date.
The 2017 budget bill submitted to parliament a week ago projects an ESA 2010 deficit of 2.4 percent of GDP. The Commission’s spring forecast shows the structural budget balance to deteriorate sharply further, to -2.9 percent of GDP in 2016 and then — based on the same no-policy-change assumption — to reverse to around -2.5 percent in 2017. Both figures are upped from the respective -2.5 percent and -2.2 percent in the winter forecast. In addition to the cyclical upturn, the deterioration reflects one-offs, the EC said. After dropping 0.9 percentage points to 75.3 percent last year, Hungary’s state debt as a percentage of GDP will remain on a declining path, dropping to 74.3 percent at the end of 2016 and to 73.0 percent at the end of next year, “even though delays in the receipt of EU funds are assumed to have a debt-increasing effect throughout the forecast horizon”, the Commission said.
The 2017-end figure was raised by 0.6 percentage points from the winter forecast.
