GKI expects slower growth, higher inflation and a larger public budget deficit than the government thought

By: Trademagazin Date: 2024. 03. 26. 23:59

The Hungarian economy entered a protracted recession in 2023, while inflation decreased significantly by the end of the year. There was a very favorable turn in the external balance, but the public budget deficit even increased compared to 2022. GKI did not change its forecast of 2-2.5% growth by 2024. However, he lowered his inflation forecast to 5.5%. The expected public budget deficit is higher than expected in December (5%), and the financing capacity of the Hungarian economy is lower (around 1.5%). In economic policy, the focus is on stimulating growth. Due to the lack of budgetary resources and uncertain demand, only limited additional growth can be expected from this, while it has an inflationary effect and hinders the improvement of the balance.

Economic policy – no new strategy. According to the government, the challenges of Hungarian economic policy can be traced back to external causes. Thus, a new economic strategy will not be developed to replace the failed re-industrialization program. As a result of the government’s severely restricted room for maneuver and the conflict between its growth-stimulating and balance-improving goals, it returns in practice to a moderate inflationary economic policy.

Consumption – 2% expansion is expected. In addition to an 11% increase in earnings and a 5.5% increase in inflation, real earnings may rise by more than 5% in 2024. The real value of pensions is expected to increase by around 0.5% compared to the increase at the beginning of the year (6%) due to slightly lower inflation (the payment of pension premiums will not be possible due to the almost certainly below 3.5% GDP growth), entrepreneurial income and social benefits however, its real value tends to decrease. Thus, real income increases by around 3%, and purchased consumption slightly less (around 2.5%).