Hungary expected to see the highest average annual inflation in the EU this year
The European Commission has published its latest Winter 2023 Economic Forecast. According to the report, all countries in the EU and the euro area now look set to avoid a technical recession, which was previously expected by early 2023.
The report was also given a detailed coverage by Telex. As they write, presenting the report, Commissioner for Economy Paolo Gentiloni highlighted that “in 2022, EU and euro area growth of 3.5 percent is higher than in the US and China.”
As for Hungary, as we have reported earlier, the Commission is projecting an average annual inflation rate of 16.4 percent for the country. By 2024, this is predicted to fall to 4 percent.
Hungary’s fiscal stimulus has come to an end
According to the EC document, Hungary’s economy contracted by 0.4 percent, possibly because much of the impact of the previous fiscal stimulus has worn off. In addition, the severe summer drought took a toll on the country’s economy. With both consumption and investment slowing, the report expects a further economic decline in the last quarter of 2022.
Economic activity is unlikely to improve this year, due to its gradual adaptation to high energy prices. In addition, consumer spending will continue to fall due to high inflation. The willingness to invest is also likely to drop due to high credit costs and more restrained government spending. The Hungarian property market is also expected to weaken, which will hold back construction projects.
Rising inflation in 2023
While inflation is expected to fall in most EU countries, in Hungary it may rise to 16.4 percent from the previous year’s 15.3 percent. Looking at the EU average, overall inflation is set to reach 5.6 percent. As reported by Telex, this means that the EC predicts an annual average inflation rate in Hungary in 2023 of more than 2.5 times higher than in the EU.
The abolition of official energy prices and the fuel cap has also contributed greatly to this high inflation. These measures could have pushed up the average inflation rate by almost four percent. The Commission also mentions the weakening of the forint and the surge in indirect taxes as other contributing factors.
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Source: DNH, telex.hu