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2024/06/13 / Erste Group Research

Gradual recovery to continue amid persistent uncertainties

The economy rebounded in the first quarter, with GDP growing by 0.8% q/q and 1.1% y/y. The dual nature of growth persisted, as the revival in the services sector continued, while industry suffered, due to subdued external demand. Given the continued uncertainties surrounding the timing of a revival in Hungary's main export markets, we maintained our forecasts for this year's annual GDP growth at 2%. While consumption is expected to keep rising, the overall economic outlook has not improved significantly, leading the corporate sector to maintain a cautious stance. This suggests that investment activity will likely remain subdued throughout the year.

Cautiousness and patience are the key words for the monetary policy. Although inflation would to a smaller extent accelerate in 2H24 than predicted earlier, persistent inflation in services concerns the MNB. In addition, the increased volatility of the forint justifies cautiousness as well. The policy rate was lowered to 7.25% at the end of May, and it is thought that there will be little scope for further significant monetary easing for the rest of the year. Strict monetary policy should help in the stabilization of the forint exchange rate, which has recently become more volatile again, due to its high sensitivity to risk perception changes.

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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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