The moderate recovery is projected to continue, based on robust export growth and a gradual acceleration of private investment. The latter will nonetheless continue to be hampered by an uncertain business environment related to controversial domestic policies and tight credit conditions, which have been alleviated only partly by the central bank’s Funding for Growth Scheme and by its low policy rate. Cyclical slack and wage moderation will keep core inflation broadly in line with the 3% target, with headline inflation temporarily lower. Unemployment should broadly stabilise over the projection horizon, and the current account surplus is set to widen further.
Recent global financial market turbulence has underlined the importance of prudent monetary policy, and the central bank will have to balance the benefits of further cuts in the policy rate against the more acute risk of an abrupt depreciation of the forint. Restoring credit growth on a more permanent basis will require a better operating environment for banks and further cleaning up of their balance sheets. After sizeable fiscal easing planned for 2014, the authorities should return to their medium-run fiscal targets.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.