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Finland, France, Hong Kong and Hungary Country Risk Report Q1 2017; New Report Launched

Market Research Reports, Inc. has announced the addition of “Finland, France, Hong Kong and Hungary Country Risk Report Q1 2017” research report to their website


Lewes, DE -- (SBWIRE) -- 11/01/2016 -- Finland's economy looks set to remain on a sluggish growth trajectory in the years ahead.

The country will lag behind both eurozone and Scandinavian peers in real GDP terms, as reforms aimed at tackling structural economic issues dampen near-term growth.

In the long term, we believe that these reforms will enhance export competitiveness but the recovery will be protracted. Finland will struggle to recover robustly from the decline of the paper, telecoms and shipbuilding industries.

Economic problems will weigh on support for the coalition government, implying that coalition unity will be hard to maintain.

Major Forecast Changes

We have revised up our 2016 and 2017 real GDP growth forecasts from 0.5% y-o-y to 0.8% and from 0.7% to 1.0% respectively.

We have revised down our forecasts for the euro exchange rate and now project the currency to continue its multiyear depreciation towards parity against the US dollar.

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French economic growth will remain weak as investment growth and external demand remain lack lustre. Meanwhile, meagre wage growth and high unemployment mean that household consumption – traditionally the key driver of the economy – will become less able to support growth. In line with the government's fiscal consolidation efforts, we government consumption growth will remain subdued.

In 2017 we expect the structural inefficiencies of the French economy in combination with rising oil prices to result in an expansion of its trade and current account deficits.

While France will benefit from a cyclical economic upswing in the eurozone, it is unlikely that improving economic conditions will be enough to save President Francois Hollande from elimination in the first round of the presidential election in April 2017.

We expect France to continue breaching the EU's 3.0% of GDP budget deficit threshold until 2018 despite consolidation efforts. Weaker trade and investment links with the UK on the back of the 'Brexit' vote in June 2016, will take its toll on French growth in 2017.

Major Forecast Changes

On the back of Brexit-induced uncertainty we have revised our real GDP growth forecasts down. We now forecast France's economy to expand by 1.1% in 2017, from 1.4% previously.

In particular, fixed investment and export growth will plunge due to low confidence among investors.

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Hong Kong is likely to experience modest real GDP growth through 2017, and we maintain our forecast for real GDP growth to come in at 1.2% in 2016 and 1.7% in 2017. Trade activity and private consumption in the Special Administrative Region will be undermined by China-related headwinds, coupled with weakness in the domestic real estate market.

Hong Kong's September 4 Legislative Council elections saw the opposition pro-democracy alliance gain ground against the ruling pro-Beijing camp, with a group of young politicians gaining seats amid displeasure over the government's failure in pushing for universal suffrage in the territory. However, we see limited prospects for significant change in the city-state's political environment as Beijing is unlikely to yield on its existing position. Meanwhile, Beijing's grip on the city-state will continue to strengthen over the coming years as the Xi administration maintains a politically conservative line. This will likely entail a further widening of the gulf between the electorate and the government, which could have implications on Hong Kong's long-term social stability outlook.

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Hungary will be a regional underperformer over the next two years. Domestic consumption will be the primary driver of growth, while slow absorption of EU funding and weak economic activity in key eurozone trading partners will present major headwinds. Our Infrastructure team holds a negative outlook on Hungary's construction sector for 2016, projecting that the volume of construction output will decline by over 14.0% y-o-y, before expanding by just 0.25% in 2017.

The automotive industry, which accounted for over 30% of Hungary's industrial output in June, is set to see a reduction in output. Our Autos team believe the impact of Brexit will have predominantly negative effects across the EU autos sector.

Hungary's budget deficit will widen over the next two years, as the government pursues an expansionary fiscal policy from Q416. Low borrowing costs and a primary surplus will allow for a gradual reduction in the public debt ratio, although it will remain the highest in the CEE region.

Given rising domestic inflationary pressures over the next two years, the Hungarian central bank will begin to normalise monetary policy by end-2017. In light of a number of headwinds facing the economy, the policy rate trajectory will follow a gradual path. Following a referendum on October 2, Hungary's rejection of the EU's migrant resettlement proposals will bolster domestic support for Prime Minister Viktor Orbán and the governing Fidesz party. Tensions with the EU will worsen considerably and could result in a number of punitive measures being taken against Hungary.

Major Forecast Changes
Persistently weak economic outlook for key eurozone trading partners will weigh on external demand in Hungary and this is likely to be worsened by the economic impact resulting from the Brexit referendum in June. In line with this, we expect real GDP growth to decelerate from 2.9% in 2015 to 1.8% in 2016 (from 2.3% previously) before accelerating marginally to 2.3% in 2017 (from 2.8% previously).

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