GKI expects slowdown

GKI Economic Research Zrt.’s summer forecast is that from a growth perspective this year is going to be much better for Hungary than the last few.

The main reason for this is that there is going to be a big temporary increase in internal demand, thanks to the government’s election-year economic policy and the influx of European Union funding. MNB, the Central Bank of Hungary doesn’t intend to lower the 2.1-percent base rate until the end of 2015. The feasibility of this strategy is questionable though, and at the end of July the forint started weakening again. Rapid economic growth in the first four months of 2014 was followed by a halt in many sectors. In the first five months there was a 2.9-percent increase in the gross average wage; since net wages bettered just as much and prices were down 0.1 percent, real wages augmented at the same rate. Looking at the whole of 2014 no price increase is expected in Hungary, due to the fact the influence of the government’s cutting utility costs suppressing market influences for the time being. Three-percent increase in real wages, 3-percent expansion in retail turnover and 2-percent consumption growth are expected in 2014 – but the artificial increasing of Hungarians’ purchasing power will hardly be possible in 2015