Further, economic trends in 2017 and 2018 are expected to be better than in 2016 due to the positive impact on growth of EU development funding with a positive effect on corporate investing. Inflation is expected to average around 2-3 percent next year, he added.

Downside risks involve challenges on the labour market, unfavourable demographic trends and a lag in competitiveness compared with other countries in the region. Kovács noted that some counties in the eastern and northern parts of Hungary have lost 10 percent of their population in recent years due to emigration.

This is partly offset by around a trillion forints of remittances in past years which has lifted domestic demand. The Economy Ministry projects economic growth of 4.1 percent this year and 4.3 percent next year.

In a document released late on Thursday, the council said it “has no fundamental objections concerning the enforceability and the credibility of the 2018 budget bill” and that the budget bill is “properly designed”. It is realistic to expect domestic consumption to lead to a fast rise in imports and household consumption could grow by an annual 4.6 percent, it said.

It warned, however, that a downturn in exports could pose a risk to economic growth, though the main factors would nevertheless be higher personal incomes and domestic consumption. The proposed budgetary spending and income figures are mostly in line with the government’s macroeconomic forecast for 2018, the council said, adding that for tax income to hit the target it would be necessary to further whiten the economy and improve the tax efficiency.

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