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Feb 01, 2019

OECD says Hungary's economic development will remain strong in the coming years

The OECD expects a GDP growth of 3.9 percent this year and 3.3 percent in 2020, compared with a 4.6 percent growth in 2018

The Organization for Economic Cooperation and Development (OECD) has outlined that Hungary's economic development will remain strong in the coming years, but there is a danger of the labor market overheating.

"The economy is prospering. Growth is expected to rise further, following a past strong performance. Domestic demand is fueled by strong private consumption, reflecting high real income gains, and dynamic business and housing investment," the report said.

The OECD expects a GDP growth of 3.9 percent this year and 3.3 percent in 2020, compared with a 4.6 percent growth in 2018. It also expects a relatively low inflation of 4 percent both for this year and 2020, compared with 3 percent in 2018.

The Hungarian Central Bank's (MNB) inflation target is 3 percent and the OECD's recommendation to increase interest rates is in line with the MNB's recent hint that a tighter policy is coming.

The unemployment rate has fallen to a historically low level of 3.6 percent and as a consequence, labor shortages have emerged. This has been, accompanied by strong and broad-based wage increases, helping to preserve a high level of income equality, and restarting income convergence with the European Union.