The recovery in investment should result in a slight improvement in the rate of growth. Public investment will recover with the gradual return of European funds (equal to 3% of GDP between 2016 and 2020) and a probable budget stimulus ahead of the 2018 elections. The launch of a public house building program is also scheduled. Under an agreement signed with the EBRD, there should be a further reduction in the special tax on banks, which should help promote credit. The SME sector (an essential element of the economy) will continue to benefit from the growth support Program aimed at encouraging the banks to lend to the sector by granting certain incentives, such as partial cover for interest rate risks. Foreign investors are not going to be left behind and at least one German carmaker is planning on increasing its industrial operations in the country in 2017. Consumption should again feel the benefits of improvements in the employment rate (67% in September 2016) and increases in wages linked with a new increase in the minimum wage and the growing shortage of trained workers in which the Public Works Programs, which employ almost 300,000 people, participate. Households could also benefit from further reductions in the prices of public services (energy). Households could also benefit from further declines in utility prices (energy). As a result of the integration of Hungarian industry within the European production chain, exports (95% of GDP) will remain vibrant.

With legislative elections in 2018, the fiscal consolidation will give way to a relaxation consisting of a reduction in social security charges, a lowering of the profits taxation from 19 to 9% and a targeted reduction of VAT. In addition, the restarting of European funding should be accompanied by an increase in public investment. The global deficit should nevertheless remain below the 3% threshold that triggers the European Excessive Deficit Procedure. The primary surplus (i.e. excluding debt interest) however, achieved since 2012, will fall significantly, slowing the elimination of the large public debt. With tax levies reaching 48% of GDP (standard VAT rate and social contributions both at 27%) and spending accounting for 50% of GDP, the room for maneuver is limited. The nationalization of new companies in the energy sector is not impossible and the costly project for the construction by Russia of two additional nuclear reactors at the Paks facility remains current. The State could, however, withdraw from the banking sector, favoring local buyers. The markets tend to be fairly confident on the progress of the consolidation, as demonstrated by the upgrading of sovereign debt by three leading agencies as investment grade and the issuing of a 10-year bond at a rate below 3% in 2016. As a result of the inducements for banks and households to invest in public debt, the share of the public debt denominated in euros and of the domestic debt in forint held by non-residents fell to 25% at the end of 2016.

Despite the expected boost to imports as a result of more dynamic domestic demand, exports of vehicles and automobile components, consumer electronics and electrical goods, drugs, medical equipment and services (medical services, tourism, road transport) should continue to produce a comfortable, even though reduced, trade surplus. Despite the remittances from workers abroad and European grants for the agriculture sector, the income balance is likely to remain in deficit, thanks to the significant stock of foreign investments. The current account surplus is set to shrink. This surplus and the European structural funds proved to be extremely useful between 2012 and 2015 when net private capital flows were negative because of the worrying economic policies of the government. With this now settling down, foreign investors are likely to cautiously begin to return. Their favored sectors, such as automobiles, electronics, and pharmaceutics, are to a large extent outside of the government’s chosen areas of intervention. The telecoms, energy, banking and media sectors, however, remain subject to government pressure. The government has adopted measures (fiscal, price setting, etc.) targeted at large companies, mostly foreign owned, which are reducing their profitability and encouraging them to withdraw in favor of local Hungarian public, as well as private, companies.

The Prime Minister, Viktor Orbán, and his conservative Fidesz-Civic Alliance party was re-elected for 4 years in the 2014 elections. Facing competition from the far right Jobbik party, in third place behind the Socialist party, it is maintaining a nationalist policy which includes opposition to the European Union on the dispersal of migrants and the continuation of sanctions against Russia. V. Orbán, however, failed to obtain approval by referendum for his migration policies. He could, however, use the parliamentary route, with the support of Jobbik.