Hungary c-bank keeps 2014 GDP growth projection at 2.1%, raises 2015 forecast to 2.5%.

By bne IntelliNews March 28, 2014

Hungary's economy is projected to grow by 2.1% y/y in 2014, the central bank said in a new forecast, confirming its previous estimate from December 2013. The bank improved marginally its GDP growth projection for 2015 to 2.5% from 2.4% expected earlier.

According to the bank, economic output will be driven mainly by exports and investment projects over the forecast horizon. However, the growth should occur in a more balanced structure than before, with domestic expenditure also picking up alongside exports.

External demand is projected to increase by 1.7% y/y in 2014, speeding up from 0.6% y/y in 2013. Exports will be driven by additional capacity expansion in the automotive industry. A weaker exchanged rate may also contribute for boosting Hungary’s export market share.

The annual growth in gross capital formation is expected to accelerate from 5.9% y/y in 2013 to 7.3% y/y this year. Corporate investment may grow significantly, in line with the improving economic outlook and easing lending constraints.

Along with improving exports, the central bank expects a gradual increase in import demand, which will result in lower contribution of the net exports.

Despite the significant increase in real wages, household consumption may only pick up gradually, by 1.3% y/y, due to the reduction of debts accumulated prior to the crisis, tight lending conditions and precautionary considerations.

The bank expects gross average earnings to increase by 3.8% y/y in 2014 and by 6.1% y/y in 2015. Employment in private sector is projected to pick up by 1.9% y/y and 0.1% y/y in 2014 and 2015, on account of private sectors.

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