Commission warns Hungary that economy could slam on the brakes

Portfolio
Hungary's real GDP growth could slow to 3.2% in 2020 from 4.9% in 2019 and then further to blow 3.0% in 2021, the European Commission projects in its Winter Economic Forecast 2020. The estimates released on Thursday show that although the EC has raised its 2020 GDP growth estimate for Hungary, it would still mark a significant deceleration.
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In its Autumn Economic Forecast the Commission projected 4.6% GDP growth for 2019, and 2.8% for both 2020 and 2021. The latest estimates show an upward revision of the 2019 forecast to 4.9% and of the 2020 prognosis to 3.2% partly due to the larger base effect. 

"The economy was able to withstand the international slowdown thanks to temporary tailwinds, including rising public investment and the launch of new product lines at major factories in the automotive sector," the Commission said about 2019 developments. It added that survey indicators and monthly data suggest that growth may ease in the near term.

The Commission forecasts GDP growth to drop to 3.2% in 2020 and to 2.8% in 2021, "as the domestic business cycle matures. Investment is set to grow more decelerate, having already reached a high level."

"In line with the anticipated slowdown, recent labour market data point to easing labour demand, which is set to curb real wage and private consumption growth. Exports are likely to rise modestly, in line with sluggish growth in key export markets."

The EU executive has revised its inflation esimates for Hungary slightly upward to 3.3% for 2020 and to 4.1% for 2021. It reminded that HICP inflation rose to 4.1% in December 2019 and averaged 3.4% in 2019 as a whole.

Increasing oil and food commodity prices and the depreciating currency accounted for the recent uptick, while core inflation (excluding energy and unprocessed food) remained at 3.7% in the last months of 2019, it added.

Inflation is set to peak in the first quarter of 2020 and decrease towards the end of the year as cost pressures fade. It is projected to reach 3.3% in 2020, and 3.1% in 2021.

Cover photo: Getty Images

This article is part of the work programme titled "The impacts of EU cohesion policy in Hungary - Present and Future" which is carried out by Net Média Zrt., the publisher of Portfolio.hu, between 1st April 2019 and 31st March 2020 with European Union financing. The views in this article solely reflect the opinions of the author. The European Commission as the funding entity does not take any responsibility for the use of information presented in this article.

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