Boom in Germany

According to a forecast by GKI Gazdaságkutató Zrt. prepared with the help of Erste Bank, the balance of external and domestic payments will show significant improvement this year, but this will have an adverse effect on growth, inflation and the rate of unemployment. The boom continues in the EU, with the German economy producing spectacular growth. This in turn generates growth in Central European economies as well. Owing to the effects of unavoidable reforms,, Hungary cannot benefit much from this trend. The rate of growth will be less than it was last year, but more than planned, at 3,2 per cent. Export is expected to grow by 18 per cent, while import will increase by 15 per cent. The deficit in the balance of international payments will disappear in 2007. The external financing requirement will be reduced to EUR 3 billion, which is less than3 per cent of the GDP. The rate of inflation will also show significant reduction after September. The average rate of inflation for the last four months will only be 4,8 per cent. Reduction in real incomes will be less than planned in the public sector, but more in the private sector. The prime lending rate will probably be reduced in June and is expected to be 6-6,5 per cent by the end of the year. The HUF will stay strong at an average exchange rate of HUF 250/EUR for 2007.