Growth is expected to moderate in 2016 before rebounding in 2017 and 2018, expanding by 2.6 % in 2017 (revised down from 2.8%) and by 2.8% in 2018.

Faltering investments in the first half have put a pall on yearly growth prospects but they are likely to pick up in the second half as the absorption of EU funds rebounds.

Household consumption is forecast to continue growing, although at a slower pace, driven by improved consumer confidence, an upturn in bank lending to households and continuing positive labour market trends. As a result, private consumption remains the main contributor to economic growth.

Employment growth, which has boosted household income growth and private consumption, is expected to slow down as the economy reaches full employment.

The jobless rate is projected to decrease only marginally.

The labour market is starting to get tight, with difficulties matching both skilled and unskilled workers with growing vacancies, the report said.

Exports are expected to grow by 6.7% this year before slowing to 5.1% in 2017.

They are likely to pick up to 6.4% the following year, the report said. Inflation is expected at 0.4% this year and 2.3 % the next.

In 2018, consumer prices are forecast to rise by 2.7%.

The budget shortfall will shrink to 1.5 % of GDP this year before rising to 2.3% in 2017.

This reflects the phasing out of one-off revenues from land sales, expenditure-increasing measures and rising domestic co-financing needs as EU-funded projects get under way.

Assuming policy remains neutral, the deficit is forecast to flat-line at 2.3% of GDP in 2018.

The public debt as a percentage of GDP is set to fall from 74.7% last year to 73.4% this year, before declining further to 72.5% next year and to 71.8% in 2018, the commission reckoned.

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