EC revises Hungary growth forecast to 3.2%

Portfolio
Although the European Commission has revised both its 2019 and 2020 growth forecasts for Hungary upwards, the 2020 forecast is still well below the Hungarian government's stated target, Bruxinfo reported. According to the report, the EC expects slower growth due to advance payments of EU funds and the stimulating effect of last year's local government elections.
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Rather unusually, the Commission's economic forecasts have been leaked before the official release date on Wednesday. (The original date was last Wednesday but was delayed a week, probably because the EC wanted to review the projected effects of the coronavirus.)

According to Bruxinfo:

  • The Commission revised its 2019 GDP growth projection to 4.9%, up 0.3pp from the 4.6% in the latest report in November.
  •  The 2020 forecast was upped 0.4pp to 3.2%. The EC foresees a sharp decline as the investment cycle peaked last year when public investments rose to nearly 7% of GDP, a historic high, due to advance payments of EU transfers and the local government elections in the autumn.
  • The Commission explained the upward revisions by higher than expected growth in Hungary in the second half of 2019.
  • Hungary's Finance Ministry maintains its 4% GDP growth forecast for 2020. Analysts in Brussels attribute the substantial gap between the EC's and Hungary's projections to the latter's higher expectations of employment and real wage growth. According to the Commission,  the growth of employment has been slowing based on monthly statistics, and the looser labour market is putting a cap on the growth of real wages.
  • The Commission expects inflation in Hungary, which it estimates to have been 3.4% in 2019, to drop to around 3% by 2021.

Cover photo: Getty Images

This article is part of the work programme titled "The impacts of EU cohesion policy in Hungary - Present and Future" which is carried out by Net Média Zrt., the publisher of Portfolio.hu, between 1st April 2019 and 31st March 2020 with European Union financing. The views in this article solely reflect the opinions of the author. The European Commission as the funding entity does not take any responsibility for the use of information presented in this article.

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