Hungary’s economic growth to recover in 2017 after likely slowdown in 2016

Hungary’s GDP rose strongly in 2015 by 3 percent; however, it is estimated to have slowed down significantly to 1.3 percent in 2016, noted Commerzbank in a research report. The economic growth has slowed because of a pause in EU structural momentum with Hungarian output lagging behind that of the Czech Republic and Poland.

The PMI is not reliable and is volatile, jumping between 51 and 57. Two major negative factors are expected to reverse in 2017. Firstly, the EU fund inflow is expected to rebound steadily through 2017. Secondly, many auto majors have stated major growth projects for 2017. Thirdly, the corporate tax rate for major firms was halved to 9 percent in January from 19 percent. And finally, the minimum wage rose 15 percent at the beginning of the year.

These factors are expected to push the economic growth to around 3 percent in the quarters ahead, stated Commerzbank. However, this momentum might reach a peak by the third quarter of 2017.

“Hungary’s trend GDP growth rate is 2 percent-2.5 percent – against this background, we forecast GDP growth to speed up from 1.3 percent in 2016 to 2.6 percent in 2017, then moderate back to 2.2 percent in 2018”, added Commerzbank.