Research Detail
| 2023/06/19 / Erste Group Research |
Challenges after challenges The economy did not manage to emerge from technical recession in 1Q23. The quarterly decline of GDP was 0.3%, while the economy plummeted by 0.9% y/y. The main culprit behind the weak performance was the negative contribution of domestic use, amounting to -5.4pp. The positive contribution of net exports (+4.4 pp), however, partly mitigated this unfavorable effect. The short-term outlook has hardy improved and high frequency indicators show that economic performance remains rather moderate in 2Q. A slightly stronger recovery is set to arrive only in 2H this year. We expect the economy to grow by just 0.5% annually in FY23. Inflation slowed to 21.5% y/y in May. The disinflation process should accelerate in 2H, partly due to the supportive base effect. External factors – energy, food prices and easing of supply chain tensions – have been disinflationary. Strong underlying processes and the government’s fiscal measures (tax changes) point to more permanent inflationary pressures, however, and the headline rate is set to reach the target band only in 2025. The MNB started to normalize its extremely high rates in May, but the aforementioned factors demand the maintenance of a positive real interest rate in the medium term. |
 Download PDF (912kB)
|
General information
| Author | Erste Group Research |
| Date | 2023/06/19 |
| Language |  |
| Product name | CEE Country Macro Outlook |
| Topic in focus | FX, Macro/ Fixed income |
| Economy in focus | Hungary |
| Currency in focus | Hungarian Forint |
| Sector in focus | - |
| Download |