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Growth should pick up in 2017 as new infrastructure projects are launched in the context of the new cycle of EU structural funding, before moderating in 2018. Private consumption should remain the main growth driver, given projected employment gains, in part supported by still large public works schemes, and faster wage growth. Increasing unit labour costs and weak markets will cut export growth.
The fiscal stance is becoming expansionary, reflecting lower personal income taxes and other measures to support the economy. However, economic slack is disappearing, pushing up wage growth and consumer price inflation, which is projected to reach the official 3% target by end-2018.
Debt service costs have fallen by 1 percentage point of GDP since 2013, creating some fiscal space. However, using that space could prove pro-cyclical unless growth disappoints, and public debt is still high. Fiscal policy could focus more on enhancing the economy's growth potential by re-prioritising public spending. In particular, scaling back public works schemes as the labour market continues to strengthen, and bolstering public infrastructure investment (beyond what is financed by EU structural funds), particularly in transport, would boost productivity.
Economic Survey of Hungary (survey page)