Economy slowing down in 2015-2016

By the end of summer Hungary’s economy slowed down a little and risks started to grow. After last year’s 3.6-percent GDP growth this year will bring plus 2.7 percent; GDP growth is expected to be 2 percent in 2016. Investment is in stagnation this year and will reduce by 5 percent in 2016. Consumption will increase by 2.5 percent in 2015 and by 1.5 percent next year. The slowing down of the Chinese economy and growing political risks (e.g. mass migration) worsen Hungary’s perspectives further. Real wages will grow 3 percent this year, just like in 2014, but the small increase in inflation will result in a slowing down of the real wage and real income growth. In 2016 the inflation rate will be higher, so real wages will only rise 1.3 percent. In Q1 2015 Hungary’s economic growth was 3.6 percent and in Q2 it was 2.7 percent. GKI thinks that the 2.4 percent budget deficit targeted in 2015 and the 2-percent deficit envisaged for 2016 are likely to be higher. Despite the improved economic performance at the end of 2014 and in the first half of 2015, Hungary’s junk credit rating remained unchanged at the three biggest credit rating agencies.