February 14, 2019 / 4:09 PM / a year ago

CORRECTED (OFFICIAL)-Hungary targets 4 pct GDP growth unless EU outlook darkens - ministry official

(Corrects Feb 14 story to show sixth largest investor, not 11th, in paragraph nine after official misspoke)

By Tom Arnold

LONDON, Feb 14 (Reuters) - Hungary is targeting growth of 4 percent in 2019 and 2020, but if a sharp slowdown in the European Union’s broader economy were to see that target missed, it will still outpace the bloc by 2 percentage points, a Hungarian Finance Ministry official said.

Hungary’s economic growth beat analyst forecasts in the fourth quarter of 2018, accelerating to an annual 5 percent, preliminary unadjusted data showed on Thursday.

The upward surprise contrasts with gloomier data from Hungary’s largest export market, the EU. Germany, the largest destination for Hungary’s exports, posted flat growth of 0.0 percent in the final quarter of last year.

“Currently, we plan 4 percent growth as we don’t see a further reduction in growth in the EU,” Gábor Gion, state secretary at Hungary’s Ministry of Finance told Reuters.

“If there’s a further or significant reduction in growth in the EU, or globally, then our target is to outgrow the EU by 2 percentage points.”

Around 25 percent of Hungary’s exports head to Germany, with some of those goods then heading on elsewhere, Gion said.

German car maker BMW said last year it would invest 1 billion euros to build a new plant in Hungary.

Fallout from Britain’s departure from the bloc could also hurt the Hungarian economy if it softens export demand, he said.

“The UK is our 6th largest investor in Hungary but it (Brexit) also offers an opportunity for us to host some businesses who plan to leave the UK as a result of Brexit,” he said.

Hungary’s growth this year will be propelled by wage growth, as well as private and public investment, with the latter likely to be spurred by a fiscal stimulus set to be unveiled in April, he said, without elaborating.

Inflation for 2019 will be below 3 percent, compared with around 2.7 percent in 2018, Gion said.

The timing and extent of any normalisation in monetary policy was up to the central bank, he added.

The central bank began an aggressive monetary easing campaign in 2012 that pushed cheap money into the economy and, together with government tax cuts and wage hikes, fed through to price rises.

“The National Bank of Hungary indicated that some normalisation would begin but with the latest developments with the Fed (U.S. Federal Reserve), everyone was expecting the Fed to continue to raise interest rates, but that’s stopped, and that’s something that’s made many central banks reconsider their monetary actions,” Gion said. (Editing by Alison Williams)

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