Economic growth may finally start this year

After two years of stagnation, the Hungarian economy may expand again this year. The external environment remains uncertain, so consumption may be the primary driver of growth, and new production capacities coming into production in the second half of the year may have a visible positive effect. According to Erste analysts, the biggest problem remains the general lack of confidence. The consumer and business confidence indices also show that economic actors are still pessimistic about their prospects overall. Based on all this, the Hungarian GDP may grow by 2 percent this year, compared to 0.5 percent last year, Erste said at its press conference.

The year did not start well in terms of inflation. In parallel with the slight recovery in the economy, the rate of monetary deterioration also accelerated, reaching 5.5 percent and 5.6 percent in January and February, respectively. It is particularly unfavorable that core inflation reached 6.2 percent in February, which also indicates increasing price pressure in the Hungarian economy with regard to more permanent inflationary tendencies. In addition to the more spectacular increase in the price of food, there were intensive price increases in market services, reflecting the effects of wage increases, recovering consumer demand and generally high inflation expectations. This year’s average annual inflation may therefore be higher than previously expected, 5.5 percent after 3.7 percent last year.