Hungary's growth to remain subdued relative to peers, 2016 real GDP likely at 2.1 pct - Fitch

Fitch Ratings Agency on Friday affirmed Hungary's Long-Term Foreign and Local Currency Issuer Default Ratings (IDR) at 'BBB-' with a Stable Outlook. The issue ratings on Hungary's senior unsecured foreign and local currency bonds have also been affirmed at 'BBB-'. The Country Ceiling has been affirmed at 'A-' and the Short-Term Foreign and Local Currency IDRs at 'F3'.

Fitch expects Hungary's growth will remain subdued relative to peers, with real GDP growth slipping to 2.1 percent in 2016 compared to 3.1 percent in 2015. Lower EU funds' disbursements on public investment is seen as a likely cause for the slowdown. That said the ramp up of the new EU fund cycle next year should support acceleration in growth to 2.6 percent in 2017 and 2018, adds Fitch.

Improved labour market (the unemployment rate fell to 5.0 percent in 3Q16 from 6.8 percent in 3Q15) and accommodative monetary and fiscal policies are likely to keep domestic demand supported. The agency forecasts a government deficit in 2017 of 2.4 percent of GDP and 2.2 percent in 2018, from an expected 1.7 percent in 2016. Fitch expects the government debt to GDP ratio will gradually decline to 71.4 percent by 2018 from 74.7 percent in 2015.

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