The wage increases could result in a greater rise in households’ disposable income than previously anticipated. Századvég said there were more uncertainties surrounding its 2017 forecast than there normally would be, adding that it could not rule out a growth rate of more than 4 percent.

Consumption is expected to grow by 5.6 percent, thanks to an increase in household incomes, compared with the think-tank’s earlier projection of 3.6 percent. Wages are expected to grow by 10.7 percent overall and by 11 percent in the private sector. Századvég put economic growth for 2016 at 2.1 percent. It said the growth rate is expected to be lifted by rising consumption, while a fall in investments is likely to slow growth.

The think-tank put the fall in investments down to companies having to wait for the next wave of European Union funds. Századvég expects a weaker foreign trade balance than in earlier years, due to a weaker demand for exports as well as higher imports due to an increase in domestic demand.

Inflation will stay low this year, with the consumer price index rising by an annual 0.3 percent, while it is likely to rise to 2 percent in 2017, the think-tank said. Századvég forecast the budget deficit at a record low 1.2 percent of GDP for 2016 and 2.1 percent for 2017.

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