The forecast published by the International Monetary Fund (IMF) in the World Economic Outlook signals that the IMF’s evaluation of the performance of the Hungarian economy is incorrect.

The GDP growth forecast of the IMF for 2013 is not in harmony with the economic indicators which have been improving month after month, and with the export market upswing anticipated also by the IMF in the second half of the year as well as with measures (such as the introduction of teachers’ career model in September, the additional cut in public utility tariffs in autumn or the extension of the Funding for Growth Scheme) which are expected to further boost domestic demand in the remainder of the year. On the basis of Hungarian economic processes and short-term indicators the IMF has come to a false conclusion by prognosticating a stagnating Hungarian economy for the second half of the year. Economic processes are pointing to higher Hungarian GDP in the second half, thus the IMF’s full-year prognosis of 0.2 percent economic growth significantly underestimates the potential performance of the Hungarian economy this year.

The IMF’s assessment of Hungarian inflation outlook is also inaccurate. Taking into consideration monthly data for January-August, the 2.3 percent annual inflation estimate of the IMF could only turn out to be true if the rate of inflation for the remainder of the year jumped markedly, by some 2 percent. This assumption, however, is unrealistic, as inflation will remain subdued for the coming months of this year. Moreover, thanks to the cutting of public utility tariffs in autumn, the monthly inflation rate for December is expected to be the lowest ever.

The IMF’s forecast on unemployment signals that the institution’s interpretation of Hungarian labour market trends has been misguided. In 2013, monthly unemployment rates have been indicating increasing improvement year-on-year. The latest available unemployment rate for June-August 2013 was 0.5 percentage points lower in comparison to the figure of last year. In the initial eight months of the year, the unemployment rate was on average 0.3 percentage points below the level registered in the corresponding period of the previous year. In light of the aforementioned facts, the anticipation of the IMF that the unemployment rate in 2013 will be 0.4 percentage points higher in comparison to 2012 is hard to understand. Labour market processes, on the contrary, show that the unemployment rate will continue to decrease, and the unemployment rate for 2013 is expected to be 10.5 percent instead of 11.3 percent as prognosticated by the IMF.

Regarding the fact that the IMF’s forecasts for 2013 are unfounded, the soundness of the prognoses for 2014 is also questionable, as it is calculated on a base of 2013.

Although the economic prognosis of the IMF paints a misleadingly gloomy picture, it also acknowledges the Government’s efforts aimed at fiscal consolidation. In the published report, the IMF prognosticates a fiscal shortfall of 2.7 percent for 2013 and 2.8 percent for 2014. Consequently, it can be assumed that in case the IMF prepared a more justified economic prognosis which appreciated the performance of the Hungarian economy the fiscal deficit estimate of the IMF would be even lower than the current, modest figure.

(Ministry for National Economy)