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2023/03/13 / Erste Group Research

Amid risks the outlook is more balanced

Subdued growth expected for this year MNB maintained its hawkishness Upward correction of yields arrived EURHUF stabilized recently

The post-Covid reopening and generous fiscal transfers fueled the growth in 1H last year, but the second half of the year brought a technical recession. Contraction of the economy is set to continue; thus, in 1Q23, GDP should slip into negative territory, even on a yearly basis. This is primarily due to further declining domestic demand. The economy is to start to slowly revive in 2Q23, while in 2H, the yearly growth should be even faster, as a result of improving external demand and moderation of inflation. The economy is set to grow by 1% annually in FY23.

The headline inflation rate might have peaked in January at 25.7% y/y. In the coming months, inflation will slow; however, the pace of price increases is to moderate more spectacularly only in 2H. As a result, the annual average inflation rate should be even higher than last year. A single-digit headline rate by year-end seems reachable, but inflation is to return to the central bank's target band only in 2025. The still-high inflationary environment and other external and internal risks justify monetary policy cautiousness. Strict monetary conditions should remain until a trend improvement in risk assessment occurs.

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General information

AuthorErste Group Research
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focusHungary
Currency in focusHungarian Forint
Sector in focus-


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