Hungary » Outlook

International Property Brokers forecast that the real GDP would increase from 1.7% to 3.5% till 2012. We expect the budget deficit to meet the targeted 3.8% of GDP in 2008, but to be above target in 2009. However, the fiscal deficit will be about 6 percent of GDP in 2007 and 4 percent of GDP in 2008.

Hungary is likely to recover over the projection period as it has been undergoing a prolonged fiscal consolidation and from mid-2007 has been struggling with weak GDP growth and comparatively high inflation. Inflation is expected to decelerate towards the 3% target, as wage growth remains moderate. The external deficit should continue to improve.

Inflation rose to an annual rate of 9 percent in March mainly due to higher indirect taxes and regulated prices, but is projected to decline to within the target range of 3±1 percent in the 18-month forecasting horizon.

The main challenge is to re-establish the sustainability of public finances. If public-expenditure improvement goes according to plans it will bring dividends to the economy via enlarged confidence, lower interest rates and reduced tax and social security wedges. This progress, along with reforms to improve labour supply, will be favorable to more stable growth in the longer term.