Hungary’s economy is expected to grow by 2.9% this year, the European Commission and the EBRD said in new forecasts released on November 5.

Both projections represent an improvement from previous estimates made in May, when the European Commission projected 2.8% growth and the EBRD pitched hike at 2.6%. The international institutions forecast stronger than expected consumption will buoy the economy.

“This upgrade primarily reflects greater-than-anticipated strengthening of household consumption, backed by improvements in the labour market and rising disposable incomes,” the EBRD said in the November edition of its Regional Economic Prospects report.

Private consumption should continue to support economic growth next year, but an expected drop in absorption of EU funds should lead to a temporary decline in investments and weigh on GDP growth in 2016, the European Commission said. It sees economic growth easing to 2.2% in 2016, unchanged from its previous forecast.

The EBRD expects a slowdown to 2.1% in 2016, as stimulus from the budget will be increasingly constrained as the government continues to seek to restore its investment grade sovereign rating.

The European Commission said the outlook is subject to downside risks coming from an escalation of the Volkswagen scandal that could affect Hungarian production negatively in the longer run. Moreover, the slowdown in China and other emerging market economies could weigh on Hungarian growth indirectly through Germany, its main trading partner.

The EBRD also warns that Hungary is highly exposed to a global trade slowdown, with 25% of exports directed to Germany, and has a considerable exposure to final demand in emerging markets.