The fresh midterm forecast projects the 2017 ESA deficit at 1.9 percent of GDP, lower than the respective 2.4 percent original projection.

The ESA deficit ratio is expected to rise to 2.4 percent in the 2018 election year before a gradual drop until 1.2 percent in 2021.

The ministry projects Hungary’s debt-to-GDP ratio to drop further, to 72.4 percent at the end of 2017 from 73.9 percent at the end of 2016, and to 71.2 percent at the end of 2018.

The debt-to-GDP ratio is then projected to drop below 70 percent and reach 62 percent by the end of 2021 according to the fresh forecast. The indicator peaked at 79.9 percent in 2011 and has dropped since. Inflation is seen averaging 2.4 percent this year, up from 0.4 percent in 2016, before rising to 2.7 percent next year and eventually stabilising at 3 percent — the central bank’s midterm target.

“The Hungarian economy will remain on a balanced and sustainable path in the coming years, and will expand dynamically, amid a stable budget, falling public debt and high employment,” the ministry said in the statement.

Investment is one of the main engines of growth this year, thanks to the home subsidy programme, the gradual rise in the use of EU funds and capacity expansions by large companies, the statement said, noting the effect of the reduction of the corporate tax to 9 percent from this year linked to last year’s six-year wage agreement.

Growth is also supported by growing consumption on the back of rapid wage rises and expanding employment. On the production side, market services contribute the most to growth.

The ministry attributed the steep expansion of the construction sector to rising home building as well as to infrastructural development co-financed by the EU.

The accelerating growth of industrial output reflects recently completed capacity expansions, among others, it said.

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