MNB: inflation continues to slow down in September

The MNB improved its inflation forecast for this year to 3.5-3.9 percent, from the range of 3.0-4.5 percent expected in June.

The background of the continuing disinflation in the first quarter of 2025 is the lower external cost environment, as well as the more moderate retrospective revaluations next year. In the second half of the future, the core inflation will also start to decrease, thus inflation will return to the central bank’s tolerance band in a sustainable way, he added.

He explained that, according to the MNB’s estimate, the increase in the transaction tax could increase the average annual inflation by 0.1 percentage points this year and 0.2-0.3 percentage points next year. The increase in the fees of banking services available to the general public affects inflation directly, while the increase in banking costs for companies affects inflation indirectly. The direct effects may appear in the inflation of market services from the beginning of 2025 at the earliest, while the indirect effects may already influence the development of inflation in the remainder of 2024.

In the latest report, the MNB lowered the GDP growth forecast from 2.0-3.0 percent to 1.0-1.8 percent for this year.

Mainly, market services can support growth, while the performance of industry may be restrained during the year based on the low order book. Agriculture slows economic growth due to drought. On the consumption side, household consumption and net exports mainly contribute to the increase in GDP, while investments slow down growth. From 2025, the partial replacement of deferred investments can begin, as well as the improvement of external demand processes, so a more balanced growth can be expected. The MNB believes that GDP growth may continue at a rate of 2.7-3.7 percent in 2025 and 3.5-4.5 percent in 2026.