The economic growth in Hungary has returned. Furthermore, the fluctuations have considerably declined as external and public debt has reduced. However, political risks continue to be high, while the Hungarian Forint is expected to stay weak, said Nordea Bank in a research note.
Hungary’s economy grew almost 3% in 2015 and was higher in 2014. Furthermore, growth in consumer expenditure appears to be recovering. Compared with the level of consumer spending that continues to be lower than the levels seen before the global financial crisis, the moderate growth is not much impressive, noted Nordea Bank. Moreover, the investment level continues to be lower than the levels seen before the global financial crisis, in spite of strong growth recorded recently.
Meanwhile, in spite of certain slowdown registered in recent months, the external balance continues to rebound. Only exports component is the one that is currently much higher than the pre-global financial crisis level. However, imports are constrained by a weak economy. Stable EU funds inflows are aided by the current account balance. Hence the Hungarian economy can continue to expand, given its still low levels. But a rebound might slightly impact external balances.
“We see 2.5-3.0% growth this year driven to a larger extent by the domestic economy”, added Nordea Bank.
Meanwhile, Hungary’s credit rating was upgraded by Fitch by one notch to BBB- last week. The nation returned to its investment grade territory with Fitch. However, S&P and Moody’s still continue to rate the country one notch lower than investment grade. Moody’s will next review its rating in July, whereas S&P will review it in September.
