Hungary's economy is projected to grow by 1.6% in 2014, speeding up from 1.1% estimated for 2013, the European Bank for Reconstruction and Development (EBRD) said in the latest edition of its Regional Economic Prospects report published on May 14. The bank slightly revised down the estimate from a 1.7% y/y GDP growth expected in January. The annual growth rate is projected to slow down to 1.2% y/y in 2015.
The EBRD noted that even though medium-term growth potential remains much diminished, recovery in domestic demand can give some impetus in the short term. The bank also highlighted that the 2.7% y/y GDP expansion in Q4 2013 was mainly driven by domestic demand which was supported by one-off factors, such as government-mandated utilities price cuts and the disbursement of EU funding at the end of the 2007-2013 budget period. It said that the second phase of the central bank’s Funding for Growth Scheme has begun only slowly and was unlikely to overcome the underlying lack of investment demand.
Hungary’s government sees this year's GDP growth at 2%. This projection is in line with the expectations of the OECD and the IMF. Earlier in May the European Commission forecast a 2.3% economic growth for Hungary, while the World Bank sees it at 1.7%.
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