EU and EBRD grow more upbeat on Hungary, but warn of global risks

By bne IntelliNews November 5, 2015

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.

Hungary's key macroeconomic indicators Autumn forecast Winter forecast
  2015 2016 2015 2016
GDP y/y change % 2,9 2,2 2,8 2,2
Private consumption, y/y change % 3,2 3,1 3,0 2,7
Public consumption, y/y change % 0,1 -0,3 0,9 -0,5
Gross fixed capital formation, y/y change % 2,2 -3,2 4,6 -1,0
Exports, y/y change % 7,9 7,7 7,3 7,5
Imports, y/y change % 7,5 6,8 7,5 6,8
Inflation, % 0,1 1,9 0,0 2,5
Unemployment, % 7,1 6,7 6,8 6,0
Current account balance, % of GDP 4,3 5,5 5,5 6,2
General govt balance, % of GDP -2,3 -2,1 -2,5 -2,2
General govt gross debt % of GDP 75,8 74,5 75 73,5
Source: European Commission's Autumn 2015 Forecast

Related Articles

Ukraine places $3bn in 15-year Eurobonds at 7.375%

Ukraine has placed $3bn in 15-year Eurobonds at 7.375% per annum, Ukrainian President Petro Poroshenko said during a meeting with international investors in New York on September 18. "Ukraine has ... more

Iran introduces its own rating system for banks

Governor of the Central Bank of Iran (CBI) Valiollah Seif has announced that his institution is to launch a national rating system for banks, Iran Labour News Agency reported on September 17. ... more

October local elections to test Macedonia's fragile political stability, IMF warns

The International Monetary Fund (IMF) said on September 18 it expects the Macedonian economy to slow down to moderate growth of 1.9% in 2017 due to the prolonged political uncertainty. The fund ... more