Recession, growing inflation, rapidly worsening external balance

In the latest GKI report, which was published in September, the company raised its growth forecast from 3.7% to 4.5% for 2022. For 2023 the company envisages not plus 2.7%, but minus 3.5%. The consumption growth that used to be 11.5% in the first quarter keeps slowing down, and it is likely to drop to 2% by the end of the year – which would still mean a very dynamic 7.5% growth for the whole year. GKI calculates with a 3.5% decrease in gross wages, but real income is expected to reduce even more. As loans are getting more expensive, consumption will drop 3.5-4%.

For 2023 GKI predicts a 16% average inflation, which is bigger than this year’s 14.5%, but in the second half of the year it would slow down to 10%. The budget deficit will be more than originally planned, 6.5% of the GDP in 2022, and 5% in 2023; the GDP-proportionate financing need will be high even Hungary finally gets the EU transfers: 5% in 2022 and 3.5-4% in 2023. This will lead to a dangerously big increase in the country’s foreign debt. //