We told you so – economic perspectives in 2023

Guest writer:
Ákos Kozák
co-founder
Egyensúly Intézet

When I had a conversation with executives last autumn, many of them were afraid that the then 3.5% unemployment will go up to 10%, and that the inflation rate will exceed 20%. There are two things behind these understandable, but basically mistaken expectations or worries: too many bad things have happened in recent years (the pandemic, supply chain disruptions and now the war), and there is a high level of uncertainty in the world. Perhaps it is the hard-to-follow changeability of the business environment that creates such uncertainty. One thing is for sure: none of these factors make planning easy nowadays; but now let’s see what is waiting for us this year!

Single-digit inflation: no sooner than the end of the year

Consumer confidence indexes started to plunge in Hungary when the war broke out, and they are also way below the European average. It is interesting that firms consider the economic situation to be better than consumers. As for consumer price expectations, at the end of 2022 people became more hopeful that the inflation would slow down. Still, it is quite sure that the inflation will peak in the 1st quarter of 2023, and it is unlikely that there will be single-digit inflation sooner than December or early 2024. After the 14.5% inflation last year, for 2023 the Equilibrium Institute predicts a 17.5% average inflation rate. Households have less money to spend, so our experts forecast a 4.5% drop in real consumption this year. This is a rather big decrease, as a matter of fact the last time we saw something like this was in the period following the 2008 recession.

The economy isn’t going to collapse

This article is available for reading in Trade magazin 2023.2-3.