The European Commission has improved its forecast for this year’s growth of the Hungarian economy, from 5.5% in the spring to 6.3%, according to fresh data published on Wednesday. The EC still expects GDP growth of 5% next year, but they highlighted that this could be even higher.
According to the European Commission’s assessment, the Hungarian economy continued to recover from last year’s shock at the beginning of this year, which was reflected in 2% economic growth. Indicators released in recent weeks, however, suggest that there may have been a slight slump in the recovery in the second quarter due to supply chain disruptions.
Of course, on an annual basis, the economy is still expected to achieve outstanding double-digit growth after last year’s nosedive. According to the Brussels body, the recovery may continue in the second half of the year, as indicated by improved business and consumer confidence. Growth may be driven primarily by consumer demand, high investment activity thanks to EU funds, and supportive fiscal policy, they added.
As the winter and summer forecasts are less detailed, only the GDP and inflation figures have now been updated. They indicate that further government measures, such as the promised tax rebate for those raising children by 2022, could pose upside risks. That is, it seems that this measure is not yet anticipated, but if implemented, it could improve growth in 2022 through an increase in disposable income.
The EC’s recent growth forecast is almost identical to that of the International Monetary Fund’s (IMF) 6.2% forecast released last week.
The European Commission has also raised its inflation forecast, especially for 2021. In their comments, it is pointed out that the 5.3% price increase in May was mainly due to fuel prices and an increase in excise duty. At the same time, the effect of the previous weakening of the national currency and rising prices of various services may further increase inflation in the coming months after the reopening of the economy. Additionally, the recovery of the labor market and the persistence of global supply and demand disruptions may also have a negative impact on inflation.
Title image: The building of the Hungarian Parliament in Budapest. (source: Jakub Halun, Wikimedia Commons)
