The Hungaran finance ministry revised the 2019 GDP forecast to 4.9% in its annual update of the Convergence Plan on December 21. GDP growth will drop to 4% next year and stay around that level until 2023, it added. The priority of the fiscal policy is to bring Hungary’s debt-to-GDP ratio below 60%, according to the statement.
In the year-end update, it expects GDP to expand by 40% in 2021 then grow by 4.3% in 2022 and 4.1% in 2023.
During the 2019-2023 forecast period, household consumption would expand at a slowing pace, growing by 4.3% in 2019 but by only 3.8% in 2023. Gross fixed capital formation will expand by 17.4% in 2019 followed by a steep drop to grow by only 4.1% in 2020 and 3.6% in 2021. Growth will pick up to 4.6% in 2022 but again drop to 3.4% in 2023.
Exports will increase between 5-6.3% during the forecast period and imports by 5-6.2%. Export growth from 2021 will outpace import growth. Net nominal wages will continue to increase, growing by 10.8% in 2019 with the growth rate gradually slowing to 8.1% in 2023.
The number of employed will continue to edge up, but growth will be the highest in 2020 and even then it will only be at 1.0%. Productivity will increase by 3.9% in 2019, by 3.0% in 2020 and by 3.2% in 2021. Inflation could be at 3.4% in 2019, fall to 2.8% in 2020 and remain at 3.0% until 2023.
The central budget's balance compared to the GDP should be negative 0.1% in 2019 but improve to 1.4% by 2020 and remain positive for the rest of the forecast period. ESA budget deficit is targeted at HUF860bn (€2.6bn) in 2019 and HUF485bn in 2020 gradually turning into a HUF2bn surplus by 2023.
The ESA deficit compared to GDP should be at 1.8% in 2019, 1% in 2020, 0.7% in 2021 and 0.4% in 2022.
The finance ministry said the most important task of fiscal policy remains to balance out general government spending by the end of the government cycle while pushing the debt-to-GDP ratio below 60%.
Economic protection measures already in place or planned for the next year will help to protect the results achieved and to maintain growth above the EU average, the ministry added.