Intrum: We will avoid a deep crisis, but a protracted recession and credit crisis may come

In the last quarter of 2022, the negative trend regarding the solvency of the Hungarian population continued, and the financial situation of households worsened on average in the last three months. The Intrum Solvency Index (IFI), a measure of families’ solvency prepared by Intrum and GKI, recorded an average value of 2.3 in the fourth quarter, which is the lowest since 2013. Compared to the same period of the previous year, the decrease is more than 90 percent.

Solvency is influenced by factors such as employment, income or price increases – in the past year, households were in a worse situation mainly due to double-digit inflation, the rise in the prices of energy carriers and stagnant wages. Hungarian inflation was 22.5 percent in November 2022, the highest in the EU. The problem was compounded by the removal of the gasoline price cap in December – because of this, solvency reached its lowest point in December.

Judit Üveges, Intrum’s sales director, pointed out that the Hungarian population primarily feels the effects of global economic problems.

“The uncertainty of the energy market and the weakness of the Chinese economy are hindering economic growth worldwide. From a certain point of view, the good news is that the Hungarian and international numbers do not point in the direction of a sudden, deep crash, for this reason, for example, there is no need to fear the release of unemployment. The residential and corporate sectors of advanced economies also have significant reserves. The indebtedness of households cannot be said to be high, and the savings rate has risen to a level not seen in a long time, due, among other things, to subsidies paid out during the pandemic. A part of the real value of these savings has already been eroded by inflation, but there is still enough left to soften the extent of the recession.”

In the third quarter of 2022, the Hungarian GDP still increased year-on-year, although it already decreased by 0.4 percent compared to the previous quarter, i.e. it entered a technical recession. Recent solvency data predict a continued recession as domestic consumption falls.