(c) 2013, Bloomberg News.

(c) 2013, Bloomberg News.

BUDAPEST, Hungary Hungary's economy will grow this year, driven by household consumption and agriculture, as the central bank keeps cutting interest rates, according to a survey of economists who previously predicted a contraction.

Gross domestic product will increase 0.5 percent this year versus a 0.2 percent drop predicted earlier, according to the median estimate of 30 economists in a Bloomberg survey. The Magyar Nemzeti Bank will cut its benchmark two-week deposit rate to a record low 3.5 percent by the end of the year, and keep it at that level through the end of 2014, it showed.

Economists are boosting growth bets as exports and consumption regain traction after two recessions in four years. The Magyar Nemzeti Bank has cut its benchmark rate by 320 basis points, or 3.2 percentage points, since August 2012 to support the expansion with inflation the slowest in almost 40 years.

"We have raised our growth outlook on higher-than-expected agricultural output and low inflation that raises real household income," Zoltan Torok, an economist at Raiffeisen Bank International in Budapest who predicts GDP will grow 0.5 percent this year, said by phone. "We don't see a big turn- around in consumption, but the outlook is slightly better."

Hungary's economy grew 0.1 percent in the second quarter from the previous three months and 0.5 percent from a year earlier as agricultural and construction output grew, the statistics office said Aug. 14. Economic growth may exceed the government's 0.7 percent forecast for this year, Prime Minister Viktor Orban said June 14.

Consumer-price growth, which the central bank is seeking to keep at 3 percent or less, will be 2 percent this year and 2.8 percent the next, according to the survey. Cuts in regulated household utility prices, mandated by Orban who faces elections next year, have helped slow inflation.

The budget deficit will widen to 3 percent of GDP in 2014 from 2.8 percent in 2013, the survey showed, staying within the European Union's 3 percent limit.

Economy Minister Mihaly Varga has pledged to keep a lid on government spending after EU finance ministers granted Hungary an exit from monitoring for budget offenders this June for the first time since the country joined the bloc in 2004.

_ With assistance from Andre Tartar in London.