The OECD has cut its growth growth forecast for this year to 1.6% fro the previous projection of 2.4% published in the November report. Next year's target were maintained at 3.1%.
The slowdown in growth is due a temporary contraction in public investment as a new cycle of EU structural funds commences, but should pick up again in 2017, according to the report.
The budget deficit of 1.9% will go up to 2.6% in 2017, a revision of 1.1 percentage points since November. The OECD revised its 2016 inflation forecast from 2.2% to 0.1% and next year's 2.7% to 1.7%.
Private demand should remain solid and employment should continue to expand, supported in part by the still large public work schemes. The public work schemes (which cost 0.5% of GDP) should be gradually scaled down as employment opportunities in the private labour market expand. With rising inflation, the central bank may need to consider moving towards a more neutral policy stance by end-2017.
The OECD advisded Hungary to carry out broad structural reforms and in particular cut red tape and improve transparency.
