Growth could exceed 4 percent if external demand grows or if investment growth exceeds expectations, the think-tank said. However, if the agriculture sector takes a hit due to adverse weather conditions or if oil prices rise higher than expected, growth could come to around 3.5 percent, the forecast added.

Wages are likely to rise by 12 percent in 2017 and by 8.6 percent next year and consumption is seen rising by 3.7 percent in 2017 and by 4 percent in 2018. Investments will likely bounce back this year after falling last year, mainly thanks to the inflow of European Union funds and the government’s move to cut the corporate tax rate to 9 percent, Századvég said.

Exports are projected to rise by 7.7 percent in 2017 and 5.2 percent in 2018.

But since imports are seen rising to 9.3 percent this year and 5.7 percent next year, net exports are unlikely to contribute to the country’s economic growth either this year or the next. Inflation is set to rise to 2.4 percent next year and 3 percent in 2018.

Századvég expects the central bank’s base rate to stay low but did not rule out a slight increase in the rate for 2018.

The think-tank forecast the budget deficit at 2.4 percent of GDP for both this year and 2018. The government’s deficit target is also 2.4 percent of GDP. It targets economic growth of 4.1 percent this year and 4.3 percent next year.

Photo: MTI

Republished with permission of Hungary Matters, MTI’s daily newsletter.