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World Bank improves prospects for Hungary's economic growth

posted onJune 7, 2018

The Hungarian economy will record an advance of 4.1% in 2018 and 3.2% in 2019,  the World Bank projected in its fresh biannual Global Economic Prospects report. Global economic growth will remain robust at 3.1 percent in 2018, before slowing gradually over the next two years.

Growth in emerging market and developing economies overall is projected to strengthen to 4.5 percent in 2018, before reaching 4.7 percent in 2019 as the recovery in commodity exporters matures and commodity prices level off following this year’s increase, stresses the World Bank's flagship report.

This outlook is subject to considerable downside risks. The possibility of disorderly financial market volatility has increased, and the vulnerability of some emerging market and developing economies to such disruption has risen. Trade protectionist sentiment has also mounted, while policy uncertainty and geopolitical risks remain elevated. 

Hungary GDP growth

A Special Focus section of the report cautions cautions that, over the long run, the anticipated slowdown in global commodity demand could put a cap on commodity price prospects and thus on future growth in commodity-exporting countries. Major emerging markets have accounted for a substantial share of the increase in global consumption of metals and energy over the past two decades, but growth of their demand for most commodities is expected to decelerate.

“The projected decline in commodities’ consumption growth over the long run could create challenges for the two-thirds of developing countries that depend on commodity exports for revenues,” said World Bank Senior Director for Development Economics, Shantayanan Devarajan. “This reinforces the need for economic diversification and for strengthening fiscal and monetary frameworks.”

Another Special Focus section finds that elevated corporate debt can heighten financial stability concerns and weigh on investment. Corporate debt—and, in some countries, foreign currency debt—has risen rapidly since the global financial crisis, making them more vulnerable to rising borrowing costs.

“Policymakers in emerging market and developing economies need to be prepared to cope with possible bouts of financial market volatility as advanced-economy monetary policy normalization gets into high gear,” said World Bank Development Economics Prospects Director Ayhan Kose. “Rising debt levels make countries more vulnerable to higher interest rates. This underlines the importance of rebuilding buffers against financial shocks.”

Among commodity importers, the Washington-based institution observes that inflation expectations are on the rise in Hungary, Bulgaria, Croatia, Poland and Romania, while inflation rates remain close to target in most of the countries of the region. Closing output gaps and fiscal policies are contributing to rising domestic inflation and widening current account deficits in Romania and Turkey, notes the  report. 

In Europe and Central Asia, growth is projected to moderate to an upwardly revised 3.2% in 2018 and edge down to 3.1% in 2019 as a modest recovery among commodity-exporting economies is only partially offset by a slowdown among commodity importers, the international institution said.

According to Trading Economics, GDP growth rate in Hungary averaged 0.58 percent from 1995 until 2018, reaching an all time high of 2.10 percent in the first quarter of 2002 and a record low of -4.10 percent in the first quarter of 2009.

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