Magazine: Slower growth, faster inflation, Eastern closure

On 29 March GKI published its latest forecast, which doesn’t predict the escalation of the war in Ukraine but doesn’t rule it out either. There can be serious disturbances in the supply chain because of the war and the related sanctions, and general demand is also expected to drop. Because of these reasons the EU’s growth rate will be 1.5-2 percentage points lower than forecasted earlier – this would mean a 2-2.5% GDP growth.

Back in December GKI said Hungary’s growth rate would be 4.5-5% in 2022, now they predict a 2.5-3% growth. GKI’s economic sentiment index has dropped to the spring 2021 level, mainly due to the worsening of the consumer confidence index. Business expectations only became worse in the industry and services, but there was no such drop in the building and construction and retail trade sectors. Companies plan to increase prices and consumers calculate with rising prices.

If the inflation rate will be around 9%, real wages will still grow by 4.5% and real pensions will become 5% higher in Hungary; the consumption growth will be about 4%. Hungary’s monetary policy is likely to turn stricter (by the end of the year the prime interest rate is likely to grow to 8%), the monthly inflation rate will be around 10% and at annual level the price increase will be approximately 9%, while one euro will cost 375 forints. //