GKI: Forecast for 2019
Contrary to expectations, the Hungarian economy did not start to slow down in the first quarter of 2019, and it even accelerated to record speed. Based on this, GKI raised its forecast issued in March: GDP growth from 3.5 per cent to 4 per cent, investments from 7 per cent to 13 per cent, and consumption from 4 per cent to 4.3 per cent. As a result of the overheating of the economy, GKI expects that inflation will be much faster than previously thought (3.7 per cent instead of 3.2 per cent), and the surplus in the current and capital account will be significantly lower (only 1.4 per cent of GDP instead of 3.2 per cent). It is almost certain that a slowdown starts from the second quarter onwards, mainly due to the termination of the growth-accelerating effects of EU transfers, the competitiveness barriers caused by spectacularly rapid wage growth, and the demand and supply barriers to export expansion.
The government will continue to pursue a forced growth-oriented economic policy (envisaging at least 4 per cent annual GDP growth in the convergence programme), which it intends to base on improving competitiveness. However, the realization of this goal is unlikely as the most important measures to strengthen market competition are missing (for example, the abolition of a tendering system with predictable winners and losers, or the modernization of the overcentralized loyalty-driven state). Unfortunately, even the expansion of these damaging features can be experienced. The pro-cyclical fiscal and monetary policy is increasingly corrected or complemented by a hidden, undeclared economic policy with high inflationary risks. As the EU elections have not resulted in the strong (extreme) right shift expected by the Hungarian political leadership, the Hungarian government’s lobbying ability, including future access to EU transfers, seems to be significantly reduced. As a result, the Hungarian GDP growth rate of around 4 per cent expected by the government will not be sustainable in the long run.
The forecast of GKI for 2019
2016 | 2017 | 2018 | 2019 | ||||
fact | September | December | March | June | |||
GDP | 102.3 | 104.1 | 104.9 | 103.2 | 103.2 | 103.5 | 104 |
· Agriculture (1) | 113.2 | 91.9 | 105.3 | 100 | 100 | 100 | 100 |
· Industry (2) | 101.0 | 103.4 | 103.2 | 103.5 | 103 | 103 | 103.5 |
· Construction (3) | 89.7 | 117.0 | 122.9 | 105 | 105 | 108 | 117 |
· Trade (4) | 100.8 | 108.1 | 107.9 | 104 | 104 | 106 | 106 |
· Transport and storage (5) | 105.0 | 103.4 | 104.6 | 103 | 103 | 103 | 103 |
· Information, communications (6) | 105.8 | 111.0 | 107.0 | 105 | 105 | 105 | 107 |
· Financial services (7) | 104.0 | 104.1 | 102.4 | 102 | 102 | 102 | 103 |
· Real estate services (8) | 103.2 | 102.7 | 104.3 | 102.5 | 103 | 103 | 104 |
· Professional, scientific, technical activities (9) | 106.5 | 110.9 | 106.5 | 104 | 104 | 105 | 105 |
· Public administration, education, healthcare (10) | 101.5 | 98.6 | 100.2 | 101 | 101 | 101 | 100 |
· Arts, entertainment (11) | 102.7 | 103.3 | 105.5 | 102 | 102 | 102 | 102 |
· Core growth (2)+(3)+(4)+(5)+(6)+(7)+(8)+(9) | 102.0 | 106.2 | 106.0 | 103.7 | 103.5 | 104 | 105.3 |
GDP domestic demand | 101.0 | 106.8 | 107.0 | 104 | 104 | 104.5 | 105.3 |
· Private consumption | 103.4 | 104.1 | 104.6 | 103.5 | 103.5 | 104 | 104.3 |
· Gross fixed capital formation | 89.4 | 116.8 | 116.5 | 105 | 105 | 107 | 113 |
Foreign trade in goods | |||||||
· Exports | 105.1 | 104.7 | 104.7 | 105 | 105 | 105 | 105 |
· Imports | 103.9 | 107.7 | 107.1 | 106 | 106 | 106.3 | 106.5 |
Consumer price index (preceding year = 100) | 100.4 | 102.4 | 102.8 | 103.5 | 103.5 | 103.2 | 103.7 |
Balance of current and capital account | |||||||
· EUR billion | 7.0 | 4.9 | 3 | 6.5 | 6.5 | 4.5 | 2 |
· In per cent of GDP | 6.1 | 4.0 | 2.3 | 5 | 4.8 | 3.2 | 1.4 |
Unemployment rate (annual average) | 5.1 | 4.2 | 3.7 | 3.5 | 3.6 | 3.5 | 3.5 |
General government balance in per cent of GDP (ESA) | -1.6 | -2.2 | -2.2 | -2 | -2 | -2 | -1.8 |
* Source: HCSO, GKI
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