Forecasting firm Moody’s Analytics has revised its GDP forecast significantly upward for Hungary and now expects a much smaller contraction in 2013 than previously.

Estimate upped only for Hungary
Moody’s Analytics, a unit of Moody’s Corp., on Wednesday revised its growth forecasts for 2013 for countries in central and Eastern Europe in light of their first-quarter economic performance.

The Czech Republic’s economy is forecast to contract 0.6% this year, versus a 0.1% contraction previously expected. Polish gross domestic product growth will slow to 1.4% in 2013 compared with an earlier call for a 1.6% expansion. Hungary’s GDP is set to shrink 0.3%, significantly less than the 1.8% drop expected previously, The Wall Street Journal cited Moody’s Analytics as saying.

GDP growth in CEE economies

Czech and Polish GDP data disappointed in the first quarter, but Hungary’s recession surprisingly ended, economist Tomas Holinka said.

“The overall fiscal situation in Central and Eastern Europe has been improving but weak investment and lack of competitiveness represent major constraints on long-term growth,” he added.

A moderate fiscal expansion together with further easing in monetary policy will support economic recovery in central and Eastern Europe in the second half of 2013, Moody’s Analytics said.

By May, Hungary lowered its policy rate 10 times in as many months to 4.5% and introduced a “Funding for Growth Scheme” to boost lending and counter the constraints of the high level of foreign currency debt. The Czech National Bank has held its main rate at a record low after annual inflation remained below the central bank’s target.

Poland’s central bank Wednesday cut its benchmark interest rate by 25 basis points to a record low of 2.75%, as the economy is virtually stagnant and consumer price inflation remains well below the bank’s target.

Others too
Over the past few weeks several favourable changes were made to the growth outlook on Hungary. The latest was a revision of OECD’s GDP estimate to 0.5% for 2013 from -0.2% projected in November. The organisation also upped its GDP forecast for 2014 to 1.3% from 1.2% previously.

Estimates for Hungary’s 2013 GDP growth
The consensus estimate of analysts for Hungary’s 2013 GDP growth went up to 0.2% from 0% in a poll conducted in mid-May and the outcome of a Reuters poll was the same.

Changes in the estimates for Hungary’s GDP growthForecasts for Hungary’s GDP growth in 2013

In view of these estimates, even the upwardly revised forecast by Moody’s Analytics can still be regarded as pessimistic.

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