GDP could grow by 2 percent in 2025

After last year’s annual GDP growth of 0.5 percent – according to raw data -, development may be faster in 2025, but still an expansion of around 2.3-2.4 percent is expected based on the current outlook. The industry, which showed a negative performance last year and has a stable new order book towards the end of the year, is expected to improve, partly due to newly started factories and a low base. The construction industry, which was also weak last year, may also perform better as a result of constructions related to investments and state projects, as well as incentive programs provided to the real estate sector. There are many question marks in agriculture due to the weather; if a dry summer follows, the sector will not really contribute to the performance of the economy, said Dávid Németh, K&H’s chief analyst, about this year’s outlook.

How high could inflation be? What interest rate level could it be coupled with?

“Inflation accelerated towards the end of last year and there are many upside risks for now. For example, the wave of price increases seen in food in recent months may persist in the first few months of the year. In addition, the weaker forint and higher energy prices have also started to trickle down into prices. In addition, tax increases for this year, such as higher transaction taxes and excise taxes, could also push up the price index. After last year’s rate of 3.7 percent, we expect an annual average inflation of slightly more than 4 percent this year,”

– the expert said.

Due to inflation risks, two or three interest rate cuts are expected this year, as a result of which the interest rate level could decrease to 5.75-6 percent. However, much depends on the pace at which the US Fed and the European Central Bank (ECB) reduce their interest rates. A Fed interest rate cut could definitely improve the room for maneuver for Hungarian central bankers.

“We expect four interest rate cuts from the eurozone central bank in the first half of the year, which could reduce the ECB base rate to 2 percent. However, we only expect easing from the Fed in the second half of the year and the dollar interest rate could decrease twice, by a total of 50 basis points,”

– he added.