Economy 11 October 2022, 3:55pm

IMF projects slackening growth, stubborn inflation for Hungary

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Hungarian economic growth could be significantly stronger this year than previously expected, but it could take a sharp downturn in 2023, according to an International Monetary Fund (IMF) forecast released on Tuesday. The organisation's experts expect inflation to peak higher and remain elevated longer, and also project a major current account deficit for the country.

After 5.7% economic growth in 2022, activity could slow down significantly next year, with the IMF expecting growth of only 1.8%. Of course, the forecasts in the latest World Economic Outlook (WEO) are still higher than the figures in the MNB's recent Inflation Report. The central bank expects economic growth of 3-4% this year and 0.5-1.5% in 2023, compared to which

THE IMF'S FORECAST IS downright upbeat.

In terms of average annual inflation, the IMF expects a slight retreat next year, with a possible 13.3% annual average CPI after this year's estimated 13.9%. This also falls within the relatively wide range estimated by the MNB.

In addition to decelerating growth and high inflation, the IMF predicts that the current account deficit could be a serious problem for Hungary. It sees the deficit reaching 6.7% of GDP this year, a very conservative estimate, as many experts consider even a 10% shortfall unrealistically optimistic in view of the increased energy bill. In addition, the current account deficit could still be 3% of gross domestic product next year, according to the IMF, forecasts that have been significantly revised down from the spring.

However, the organisation's economists have become more optimistic about the Hungarian labour market, with the unemployment rate expected to drop from the previously projected 4%+ to 3.4% this year and 3.8% next year.