In the European Commission Outlook published earlier today, the economic growth prognosis for Hungary was once again revised upward. This estimate is in line with the Government’s projection. Data for 2014 and 2015 are also noteworthy as the pace of growth within the EU28 is expected to slow down.

In light of data from Brussels, the Hungarian economy is set to expand by 3.2 percent this year, which is the second best figure in Europe. According to the prognosis, the unemployment rate will stay stable below 8 percent and the inflation rate will average 2.5-3 percent in the coming years. Brussels forecasts Hungary’s fiscal deficit to be 2.9 percent this year, 2.8 percent in 2015 and 2.5 percent in 2016.

The outlook for 2014-2015 is in line with the macro-economic path submitted by the Government with the 2015 budget bill. The Commission’s estimate confirms that the prognosis of the Government is reliable and credible. The growth estimate is higher than it was in the spring outlook and the Commission is of the opinion that Hungarian economic growth will exceed the EU average in 2014-2015.

In the report, the Commission emphasises that higher economic growth expected for 2014 is a consequence of better-than-anticipated investment data that stem from the faster utilization of EU funding and the note bank’s lending programme. Thanks to households’ increasing incomes in real terms, domestic consumption has also remained robust and net exports have also continued to underpin economic growth.

Employment and economic activity rates have been improving, while the unemployment rate is expected to remain below 8 percent. The low inflation level of 2014 will gradually rise to the note bank’s inflation target for 2016.

Parallel to strong domestic demand, the country’s foreign trade surplus and financing capacity will stay sound. Due to that, the fast decrease of Hungary’s external debt will continue in the coming years which will in turn reduce the economy’s vulnerability. As far as the year 2014 is concerned, the Commission has accepted the Government’s prognosis regarding the central government budget deficit of 2.9 percent and a debt-to-GDP ratio of 76.9 percent, which was submitted in a report to Eurostat. The Commission also expects a fiscal deficit of below 3 percent. The central government debt-to-GDP ratio is also seen to edge lower, by 0.5 percentage points, to 76.4 percent in 2015.

(Ministry for National Economy)