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Economic activity slowed temporarily in 2016, but has since rebounded, fuelled by public investment as the disbursement of EU structural funds resumed. Business investment should expand on the back of inward FDI and emerging capacity constraints. Continued robust private consumption will rely on further employment gains and higher real wages, driven by unemployment at record-low levels. Declining external cost competitiveness will limit gains in export markets.
The fiscal stance will remain expansionary, as taxes are lowered and growth-supporting measures are implemented. The disappearance of economic slack and large statutory minimum wage increases have boosted wage gains, and consumer price inflation is projected to surpass the central bank’s 3% inflation target in early 2018, requiring monetary tightening.
Hungary is benefitting from globalisation through inward FDI in selected sectors and regions. A more market-friendly regulatory and competition policy stance would promote competitive firms that participate in global value chains. Domestic firms could benefit more from such external market opportunities by a faster shifting of public support from public works schemes to relevant training and skills development, enabling other sectors and regions to participate in such opportunities.
Economic Survey of Hungary (survey page)