GKI is more pessimistic than the government about growth, inflation and public finances

This article is available for reading in Trade magazin 2024/5

The expected government deficit is higher than the December prediction was (5%) and the financing capacity of the Hungarian economy is now lower (around 1.5%). The focus of economic policy is on stimulating growth. This is expected to generate only limited additional growth, due to the lack of budgetary resources and uncertain demand, while having an inflationary impact and hampering the improvement of the balance.

Consumption is expected to grow by 2%. With wages rising by 11% and inflation at 5.5%, real earnings could increase by a solid 5% in 2024. Investment is likely to fall by 2% and incoming EU transfers are expected to be little or no higher than last year’s EUR 2bn. As purchasing power is growing, retail sales will expand by 3%. Employment will rise by 0.2%, but unemployment will grow to around 4.2% on an annual average basis. As for public finances, austerity will be stepped up after the elections and the excessive deficit procedure will be launched this year, albeit without sanctions yet – the deficit should be reduced from 6.5% to 4.5%. //