Research Detail
| 2022/03/10 / Erste Group Research |
Economy to slow after recovery, amid rising inflation pressure The outbreak of the Russian-Ukrainian war has created additional uncertainties, posing lower risks to GDP growth and higher risks to inflation. Last year's outstanding economic growth figures, coupled with a loose fiscal policy, create strong momentum for the beginning of this year. However, a longer-lasting war increases the likelihood of downside risks materializing. Due to the increased uncertainties and possible negative consequences of the war, we expect this year's GDP growth to decline below 5%. The mid-term outlook has also worsened - growth figures are set to be slower than 4% annually in the medium-term horizon. The MNB has been continuing its long battle against surging inflation. The monetary policy toolkit has remained rather complex. In the current setup, the rate of the one-week deposit facility determines effective rates. Upside risks to inflation and the vulnerability of the domestic currency imply further monetary tightening. We expect the policy rate and one-week depo rate to converge above 7%, probably in the first half of the year. As a result of the war, the forint hit a new historical nadir at 400 in early March. We believe that further rate hikes should help the stabilization of the forint at stronger levels against the euro. |
 Download PDF (146kB)
|
General information
| Author | Erste Group Research |
| Date | 2022/03/10 |
| Language |  |
| Product name | CEE Country Macro Outlook |
| Topic in focus | FX, Macro/ Fixed income |
| Economy in focus | Hungary |
| Currency in focus | Hungarian Forint |
| Sector in focus | - |
| Download |