With regard to Hungarian fiscal and inflationary processes in its latest report the OECD expresses an opinion similar to the Government’s. However, in terms of short-term growth prospects the standpoints of the international organization and the Government do differ, Minister of State for Financial Affairs Ágnes Hornung said, commenting on the latest country report of the OECD.

In the Economic Survey of Hungary, the OECD reduced the 2016 GDP growth estimate to 1.6 percent, adding that the slowdown in the first of the year is decidedly transitory. Accordingly, they have revised upward the predicted rate of growth to 3.1 percent in 2017 – in line with the expected acceleration of output in the second half this year – and this is on a par with the Government’s prognosis predicted in the Convergence Programme, the Minister of State stressed.

Although the OECD’s rationale for reducing growth estimates is based on weaker-than-anticipated first quarter data, the survey also mentions the cyclicality of EU fund flows. The Hungarian Government is expecting EU transfers to pick up in the rest of the year, and – coupled with the new housing scheme – these factors are going to add momentum to the construction sector, investment and economic expansion, she pointed out. The volume of new orders and high capacity utilization rates are both point to rising construction sector output, she added.

The stock of manufacturing orders, which is higher than that of last year, also signals industrial sector growth. In the first quarter, winter production breaks and various technical issues decelerated output growth, but as these obstacles are removed the sector is likely to regain the momentum it had had last year, and that may fuel expansion in the coming quarters, in line with prior estimates.

The OECD applauds favourable labour market trends, rising employment levels and the record-low unemployment rate, Ágnes Hornung emphasised. The dynamic increase of household incomes is also underpinning consumption, and it is also being reflected in the rising household confidence index.

The OECD’s findings on fiscal processes are mainly in line with those of the Government, as these predict a budget deficit of 1.9 percent for 2016 and 2.6 percent for 2017, while the Converge Programme prognosticates 1.9 percent and 2.4 percent, respectively. Inflation is also seen is a similar light: the OECD estimates 0.1 percent for 2016 and 1.7 percent for 2017, whereas the Cabinet’s projections are 0.4 percent and 0.9 percent.

Ágnes Hornung pointed out that while the OECD shared a similar view with the Government concerning fiscal processes and inflation, the organization had failed to take into account the effect of favourable processes expected in coming quarters on full-year year growth.

The Government anticipates a major revival, as negative factors that dampened first quarter growth are set to fade away and be replaced by growth accelerators.

(Ministry for National Economy)