Commentary Economy

European Commission forecast economic slowdown in Hungary

The European Commission (EC) upgraded its forecast for Hungarian economic growth this year and next, but at the same time warned that the economy has reached the limit of its growth potential and is close to overheating.

“Growth is set to lose momentum as capacity constraints limit the further expansion of domestic demand, while external demand remains subdued. GDP growth is set to slow to 3.7 percent in 2019 and 2.8 percent in 2020,” the EC said in its spring forecast for Hungary.

While the GDP growth forecasts are lower than last year’s record-high 4.9 percent economic growth, they still 0.2 percentage point higher than the last (winter) forecast.

Both figures are also higher than the projected average economic growth in the European Union, which is seen at 1.4 percent this year and 1.6 percent next year.

In terms of economic balance, the EC forecast noted that the country’s budget deficit of 2.2 percent last year was below the government’s 2.4 percent target and is expected to improve further to 1.9 percent of GDP this year, and 1.8 percent in 2020.

The country’s debt-to-GDP ratio is expected to fall to 76.7 percent by the end of 2020 from 70.8 percent at the end of 2018.

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