Government: Hungary to avoid recession this year, experts disagree

Hungary’s economy is projected to avoid a recession in 2023, and return to steep growth next year, despite the protracted war in Ukraine and the European Union’s sanctions on Russia, the finance ministry said on Tuesday. However, according to experts, there are still tough times ahead, and this might not even be the rock bottom yet.

What does the government say?

The economy’s foundations are robust, with one of the lowest unemployment rates in the EU and the number of jobholders stable around 4.7 million. The country’s investment rate and export performance remain high, the statement said. Although Hungary is yet to receive the funding “it is entitled to” from the EU’s Resilience and Recovery Facility (RRF), its economic performance is 4 percentage points above the level it was before the coronavirus pandemic, while the EU average hovers around 3 percentage points higher, it said.

Economic growth was 7.2 percent in 2021 and 4.3 percent in 2022, despite the challenges Hungary faced in a “dangerous international environment,” the statement said. The protracted Ukraine-Russia war and the related EU sanctions continue to weigh on the international environment in 2023. “Had Hungary been able to use the recovery funding it is entitled to, economic growth would have been above 5 percent. By withholding the funds, the European Commission hobbled our economic performance and competitiveness,” it said.

GDP edged down by 0.2 percent in the first quarter, compared with Q4 2022, and by an annual 0.9 percent. However, the economy is expected to expand again in the subsequent quarters, the ministry said. According to forecasts by the EC and the International Monetary Fund, Hungary will avoid recession in 2023, it said. Government measures to improve the balance indicators will ensure the country’s security, protect families, pensions, jobs and maintain the utility price caps, the statement said.

What do experts say?

On the contrary, experts are not very optimistic about the future. According to Péter Virovácz, analyst at ING, the chances are 50-50 percent that our economy will emerge from the technical recession before the third quarter or not. Péter Kiss, investment director at Amundi Fund Management, thinks there will still be a slight downturn in the second quarter of April-June, hvg.hu reports.

Both analysts said that the 0.2 percent quarterly decline was not as bad as experts had previously expected. However, as Virovácz pointed out, the KSH has now revised the previous quarters’ data downwards, resulting in a smaller-than-expected decline against a weaker base.

It is not a surprise that the economy fell mainly because of industry. Furthermore, the good performance of agriculture is more of an estimate, due to the fact that last year was very bad, but the season will start later, Péter Virovácz noted.

Péter Kiss pointed out that household consumption is falling due to high inflation. Meanwhile, high energy costs and high interest rates are weakening manufacturing and reducing investment. In addition, although recessions usually put a brake on price increases, inflation is not expected to fall below 20 percent at all until July.

Source: