...Source: Eurostat, BMI of FX-mortgage loans into forint by the government. ...Gross Fixed Capital Formation: Stronger levels of private consumption and improving external demand will prop up fixed investment amid a slowdown in EU fund absorption in the coming years. Credit conditions will be increasingly supportive of corporate lending as bank deleveraging runs its course and the tax burden is reduced, while low interest rates will support mortgage lending and in turn the residential construction sec- tor. In line with the --------- budgetary period, the inflow of EU structural funding will steadily increase again up to ----, with the associated infrastructure projects supporting Hungary s investment outlook for the years ahead. Net Exports: Net trade s pp contribution to GDP will turn into negative territory in ----, as structural weaknesses in the eurozone economy hinder potential export growth over the long term. While being one of the most open economies in -- Business Monitor International Ltd www.bmiresearch.com
...Having been propped up by fiscal stimulus and EU transfers, real GDP growth in Hungary will remain at relatively subdued levels in the coming quarters as government spending is scaled back. Hungary s domestic demand recovery will continue, but trail that of Central European peers due in part to a crippled banking sector. However, we see steady economic growth ahead, driven by ac- celerating external demand, improving terms of trade and a better outlook for private consumption. Although public debt remains well above Emerging European aver- ages and is forecast to decline slowly in the coming years, Hungary s sovereign profile has improved in recent years following substantial external deleveraging. Hungary s current account surplus will remain sizeable in the coming years, bolstered by falling oil prices. ...Alleged infringements of civil liberties in Hungary will leave the government ostracised from decision-making at an EU level. This isolation will pose little threat to government stability, given the strong popular support the government enjoys, but it does pose a threat to
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