Hungary

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Hungary’s GDP growth rose to 8% year on year in Q1 2022, driven by pre-election and pre-war spending, while the macroeconomic equilibrium deteriorated radically as a result of overheating. Close to 90% of the annual targeted budget deficit was accumulated in the first half of the year, and a large deficit emerged in foreign trade. The exchange rate remained weak despite policy rate rises, and consumer price inflation recorded double-digit growth despite price caps. In early June the government announced a consolidation package for the remainder of 2022 and in 2023, with measures accounting for 3-3.7% of GDP in each year. These include a considerable increase in existing specific sectoral taxes and the introduction of new taxes, which are primarily targeted at the large multinational firms in the services sector. The postponement of public investment projects has been announced and price caps on energy will be maintained for households only – a painful change for resource-deprived local governments and many businesses. Other, not yet specified expenditure cuts have been announced as well. In the wake of the consolidation package the mobilisation of suspended EU transfers may become crucial. Recovery and Resilience Facility funds and traditional transfers from the EU budget would compensate to a large extent for the shrinking aggregate demand due to the consolidation package. Since the beginning of the war in Ukraine political relations between the EU and Hungary have become even worse than before, leaving little chance of the country accessing the outstanding EU resources any time soon. This year the impact will still be cushioned by the strong growth recorded in the first quarter and a prolonged spending rush of households in reaction to growing inflation. The full negative impact of the consolidation measures on growth will be felt in 2023. This forecast assumes a lasting suspension of most EU transfers. Should a compromise emerge, inflows of EU transfers would allow a milder deceleration of economic growth.
        FORECAST*
Main Economic Indicators201920202021202220232024
Population, 1000 persons977197509710...
GDP, real change in %4.6-4.57.13.11.52.7
GDP per capita (EUR at PPP)228002223024530...
Gross industrial production, real change in %5.6-6.09.6...
Unemployment rate - LFS, in %, average3.44.34.13.63.63.6
Average gross monthly wages, EUR113111491224...
Consumer prices, % p.a.3.43.45.211.06.04.0
Fiscal balance in % of GDP-2.1-7.8-6.8-5.5-4.3-3.7
Public debt in % of GDP65.579.676.8...
Current account in % of GDP-0.8-1.1-4.2-4.5-2.5-1.5
FDI inflow, EUR m305831697065...
Gross external debt in % of GDP73.281.284.4...


Basic data are continuously updated.

* Forecasts are changed beginning of January, April, July and November.
See Press Conferences.

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Monthly Report No. 7-8/2022

Vasily Astrov, Alexandra Bykova, Rumen Dobrinsky, Selena Duraković, Richard Grieveson, Doris Hanzl-Weiss, Gabor Hunya, Branimir Jovanović, Niko Korpar, Sebastian Leitner, Isilda Mara, Bernhard Moshammer, Olga Pindyuk, Sandor Richter, Bernd Christoph Ströhm, Maryna Tverdostup, Nina Vujanović, Zuzana Zavarská and Adam Żurawski
wiiw Monthly Report No. 7-8, July-August 2022
58 pages including 4 Tables and 21 Figures

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HUNGARY: The party is over

Sandor Richter
in: Overshadowed by War and Sanctions
wiiw Forecast Report No. Spring 2022, April 2022 , pp. 65-68
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