ANALYST VIEW: Hungary's facing deep recession in 2020, but strong rebound next year
EM economists at Morgan Stanley in London forecast the deepest recession for Central and Eastern Europe in the Czech Republic for 2020 (-7.8%). They expect GDP to contract by 6.7% in Hungary and by 5.0% in Poland this year. They highlighted that this will be the first recession in Poland of the last 30 years.
Yet, Morgan Stanley projects Hungary's GDP to grow by 4.6% in 2021, stressing that both the Hungarian and Polish economies will reach pre-coronavirus crisis levels by the fourth quarter, adding that the same rebound in Czechia will be reached by mid-2022.
The analysts noted that their 2020 GDP estimate for Hungary is 2.6 percentage point lower than the wider consensus, while their 2021 estimate is 0.6ppt higher than the average of forecasts. The economists at MS believe that the synchronised upturn in the European economy will benefit the Hungarian economy both directly and indirectly.
The growth trajectory of Hungary's GDP will continue to be determined by retail consumption, as the growth in the value of investments is expected to gain momentum only from H2 2021. Morgan Stanley expects consumption to start increasing as early as in the third quarter of 2020, mainly as deferred demand will materialise, although the rate of growth could be dampened by precautionary saving.
Morgan Stanley expects Hungary's general government deficit to be around 5.0% of GDP this year and retreat to around 3.0% next year.
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