Hungarian economic research institute GKI revised its growth forecast slightly from 3.4% to 3.5% for 2019 after a near record-breaking level in 2018, it was announced on March 4. 

GKI's projection is in line with most forecasts and that of Hungary's central bank the Magyar Nemzeti Bank (MNB), but is significantly below the government's 3.9% target. 

Last year, Hungary's economic output, the highest since 2004, was driven by domestic consumption, up 4.6% on an annual basis and investments up 16.5%. The 5% growth was probably the second fastest growth rate in the EU after Poland, GKI said. 

GKI expects the inflow of EU transfers, one of the main catalysts for Hungarian growth, to remain at a steady level, but this will generate only a 7% rise in capital expenditures. 

Similarly, the growth rate of domestic consumption will likely drop to 4%, as wage growth is likely to be lower and offset by rising inflation. GKI expects real wages to drop to 5-5.5% and retail sales from 6% to 4%. The average annual inflation is set to rise by 3.5% after 3% in 2018. 

The economic researcher also forecasts a sharp deceleration in construction sector from 22.3% in 2018 to 5% and that of industrial output from 3.6% to 3%. 

GKI said the government’s family support scheme and the recently announced competitiveness programmes by the MNB and the finance ministry were drawn up without any consultation with social partners and without any prior impact analysts. There is no real commitment to reforming the education system, healthcare, and other public services, it said. 

The programmes do not address the problems of falling EU transfers and most of the proposals are state-centred rather than market-oriented, it added.