The latest Economic Outlook of the Organization for Economic Cooperation and Development (OECD) presented a positive economic forecast on Hungary, assumptions of which are in line with those of the Government. Prognoses published in autumn 2015 by international organizations, credit rating agencies and market analysts signal that Hungarian reforms are working.

The OECD Economic Outlook predicts GDP growth of 3 percent for 2015 and 2.4 percent for 2016, which are roughly in line with the Government’s expectations of 3.1 percent and 2.5 percent, respectively. The OECD’s estimate for 2017, 3.1 percent, is well above the figure of the European Commission.

OECD analysts emphasise that the favourable growth dynamics of the Hungarian economy is to remain in place in 2015, thanks to the performance of each sector. Refunds for private households resulting from fair banking regulations are boosting consumption, while the forint conversion of forex loans has been improving confidence. Along with EU-financed infrastructure projects, the private sector’s contribution to investment growth has also increased. In addition, Hungarian exports have also been steadily bolstering GDP growth in Hungary.

The OECD was also upbeat on favourable labour market processes, given the fact that the number of private sector jobs has increased along with jobs in public work schemes. The increasingly neutral monetary policy of coming months is expected to sustain the downward trend of general government debt.

It is an especially encouraging sign that in the opinion of the OECD domestic factors point to further growth in Hungary. The volume of both corporate and private real estate development projects are above prior estimates, while consumption is seen to be boosted by higher-than-expected employment growth.

In 2016, lower GDP growth (2.4 percent) will stem from the deceleration of public sector investment due to a cyclical downturn of the payment of EU funding. At the same time, consumption is set to be driven by improving employment and the lower personal income tax rate to be introduced in 2016. Exports are expected to remain robust and thus add to the country’s existing current account surplus.

The OECD report on Hungary is especially promising in light of the fact that global growth perspectives have recently worsened. The outlook of emerging markets – especially of China’s economy – is highly uncertain, while the performance of developed countries has been dampened by subdued investment activity.  Accordingly, the OECD revised downward global growth estimates, especially that of 2016.

For the entire document please visit:

http://www.oecd-ilibrary.org/economics/oecd-economic-outlook_16097408

(Ministry for National Economy)