The majority of the analysts working alongside the Fiscal Council (FC) predict around 4.5 percent growth this year with a slowing rate prognosed for next year, the joint Budapest conference of the Hungarian Economic Association (HEA) and the FC revealed on Friday.
As Árpád Kovács, Chairman of the Fiscal Council explained, the conference is organized every year to demonstrate to the scientific audience and the community of economists that the Council’s decisions extensively rely on the opinion broadly formulated by professional workshops.
During the conference Gergely Baksay, Director of the National Bank of Hungary (MNB) said that the deficit targets established for 2019 and 2020 were realistic. He pointed out: if the budget reserves were fully utilized in 2020 it would result in 1.4 percent deficit, without which the deficit would be only 0.6 percent compared to GDP, the budget being counter-cyclical in both cases. Gergely Baksay indicated: the debt path outlined by the Government is realistic; the debt-to-GDP ratio is to decrease further over the coming period, with the MNB forecasting 67.3 percent for this year, which could decrease to around 64 percent in 2020. ‘Moreover, interest spending compared to GDP already decreased from 4.5 percent in 2013 by almost half, to 2 percent’, he added. He also explained that in terms of budget processes it was also positive that the cash revenues increased in the first eight months of 2019 year-on-year.
József Simon, Head of Audit at the State Audit Office highlighted: considering this year’s budget revenues corporate tax presented the highest risk with an expected HUF 80-100 billion less revenue than planned. This, however, is to be compensated by VAT and PIT revenues. ‘In terms of budget expenditure performance has been time proportional’, the expert said. He pointed out that there was no risk or threat to achieving the budget deficit and debt ratio targets.
Ilona Cserháti, Associate Professor of Corvinus University of Budapest said: considering Hungary’s economic situation it is highly positive that the GDP growth rate was outstanding at 5.1 percent last year and in the first half of 2019 as well, along with similarly high household consumption growth rate at 4.8 percent in H1 2019. She pointed out that Hungary’s economic growth rate could reach approximately 4.5% in 2019, 3.5% in 2020 and 3.3% in 2021, although accompanied with lower investment growth compared to previous years. ‘The inflation rate is expected to be around 3.3 percent in 2019’, she added. Ilona Cserháti indicated no significant risk to the planned fiscal path. As regards external trade balance deterioration is expected, to be compensated by services for the time being. Among the external risks the actual implementation of Brexit, the impacts of the United States-China trade war on global trade and the oil price related uncertainties were mentioned.
Senior Analyst of Századvég Gábor Regős said: GDP growth is expected at around 4.8 percent this year, the high growth rate of the first six months pointing towards a slow-down, and 3.9 percent expansion prognosed for next year. He said: the current account is expected to have zero balance or thereabouts in 2019 along with 3.4 percent inflation rate forecast, and uncertainties surrounding the oil price. Gábor Regős pointed out: the current structure of Hungary’s economy is much better than it was in 2008-2009, ensuring higher resilience for the households and businesses, and even the public sector than during the crisis in 2009.
Judit Antal, Senior Economist of OG Research said: capacity utilization is increasing simultaneously with the continuous capacity building investments, the question being what to expect without further significant development increase. Judit Antal highlighted: in the short term dynamic growth is expected with potential gradual slow-down in the medium term, the GDP growth reaching 4.6 percent in 2019 and possibly 3.3 percent next year. The analyst has already calculated with stricter fiscal policy for this year and a neutral approach beginning from 2020. She indicated that due to economic whitening the public deficit-to-GDP ratio is not expected to increase above 3 percent until 2022, with further decrease in public debt. (MTI)
Slides of the conference presentations:
Presentation by Judit Antal – Macroeconomics and public finance (pdf)
Presentation by Judit Antal – International overview (pdf)
Presentation by Gergely Baksay (pdf)
Presentation by Gábor Balás (pdf)
Presentation by Pál Belyó (pdf)
Presentation by Gábor Regős – Healthcare (pdf)
Presentation by Gábor Regős – Macroeconomics (pdf)