In the European Economic Forecast Winter 2014 published yesterday, the European Commission forecasts an improved growth outlook for the Hungarian economy. The Commission estimates the fiscal shortfall for 2013 to be significantly lower than the Government’s target. For 2014-2015, the Forecast prognosticates that the deficit will not be above 3 percent of GDP. This European Commission report confirms that the Government has set realistic objectives.

In comparison to the Autumn Forecast, the Commission sees Hungary’s growth prospects to be markedly better for 2014. According to the Commission’s expectations, Hungarian economic expansion will exceed the European average in 2014-2015.

Practically, the Commission’s estimate is very much similar to the macroeconomic outlook of the Ministry for National Economy prepared for the draft budget act, as it predicts economic growth of 2.1 percent in 2014 and 2015.

In the opinion of the Commission, domestic demand will be the main driving force behind the growth in coming years. Household consumption is being boosted by rising real incomes, resulting primarily from the rounds of utility price cuts, public sector wage hikes as well as improved lending conditions. Private sector investment has been reinvigorated by the Funding for Growth Scheme of the National Bank of Hungary. In addition to the above, the more active utilization of EU funding has also been contributing to investment growth within the national economy. The Commission also predicts further export growth. The report states that Hungary’s current account will continue to post a substantial surplus, exceeding 2.5 percent of GDP.

The Commission is expecting further improvement in employment and an unemployment rate well below 10 percent in 2014-2015, owing to economic rebound and the recovery of the private sector.

In the report’s estimate, the fiscal deficit of 2013 will be 2.4 percent, much lower than predicted in the Autumn Forecast, while for 2014 a shortfall of 3 percent of GDP is prognosticated. For 2013, the government debt-to-GDP ratio, at 77.8 percent, is predicted to be lower than the 79 percent figure projected in the preliminary financial accounts outlook.

(Ministry for National Economy)