A slow recovery awaits the Hungarian economy

By: Trademagazin Date: 2024. 03. 13. 13:03

This year, the Hungarian economy started to grow after last year’s decline. However, the speed of recovery is expected to be lower than previously hoped due to the lingering effect inherited from 2023 and the weak external economy. The rate of inflation will decrease significantly in 2024, and in parallel, the central bank base rate will also decrease further.

Compared to the previously calculated 3.2 percent, Erste’s analysts expect GDP growth of only 2 percent for this year, while next year economic growth may reach 3.4 percent. One of the reasons for the slower recovery is that the growth that started in the third quarter stalled in the last three months of last year, and the performance of the economy essentially stagnated compared to the same period of the previous year. In addition to the lingering effect, the delay in the recovery of the global economy can also hinder expansion: companies operating in Hungary cannot, or only have difficulty, exploiting the export opportunities provided by the significant capacity expansions implemented earlier.

The economic recovery is supported by the rise in real wages, which can help the awakening internal demand, although the favorable effect of this may be delayed by the expected introduction of the interest rate cap. As far as investments are concerned: a sharp rise in loan demand cannot still be expected, but at the same time capital operating abroad can contribute to the expansion. The fact that a part of the EU funds for Hungary has been released can support the growth processes, so unlike the last two years, the domestic use of EU funds can be dynamic this year.