Government Adjusts Economic Growth Forecast Amid Rising Consumer Trends
Hungary's government revises GDP growth estimate for 2023 to 2.5%, citing strong consumer performance while addressing inflation concerns.
Hungary's national economy minister, Márton Nagy, announced on Monday that the government's GDP growth forecast for 2023 has been adjusted from 3.4% to 2.5%.
This revised figure aligns closely with the Hungarian National Bank's prediction of 2.4%.
Concurrently, the government projects an inflation rate of 4.5%, slightly lower than the bank's estimate of 4.8%.
Looking ahead to 2025, MBH Bank anticipates a growth rate of 2.6%, whereas UniCredit Bank's forecast is more pessimistic at 1.8%.
Minister Nagy emphasized that preparations for the 2026 budget are already underway, with a new macroeconomic proposal developed by the Ministry of Finance expected to be completed by summer.
He projected that the third quarter of this year could see GDP growth exceeding 3%, with potential for growth to reach 4% in the fourth quarter, suggesting a quickening pace in economic expansion.
The ministry's forecasts highlight a significant consumer trend, with retail sales expected to move into the 5% to 10% range by the third quarter.
Nagy pointed out the importance of large factories joining the national economy, with most investments in the corporate sector aimed at capacity enhancement, while small and medium enterprises focus on improving efficiency.
Despite a noted strengthening of internal economic conditions, external factors remain challenging, particularly from Germany, which has altered its debt brake rules.
Nagy noted that the German economy could grow by 1% this year, thereby significantly impacting Hungary's economic landscape.
However, he cautioned that Hungary's exports might remain negative despite external demand strengthening.
In reference to inflation, Nagy labeled it as a 'near enemy,' reiterating that the government will continue to disburse pension premiums within the year.
The government is particularly concerned with inflation in the food, banking, and telecommunications sectors.
He indicated that there is a strong possibility of implementing price caps in banking services, highlighting the complexity of negotiations in this sector.
Discussions with telecommunications firms are set to take place, focusing on voluntary price reductions in this area.
The price cap's effects have been significant, with the government calculating that it led to price decreases for 884 products, although it also recorded price increases for 70 products, attributed to the culmination of previous promotions.
March food inflation could reach 7%, with expectations that it will decline to around 5% in April.
Additionally, the government anticipates a real wage growth of 4% this year, with the private sector average salary projected to reach HUF 1 million by December 2028.
No modification to the base budget plan is anticipated due to the subdued growth outlook.
A legislative package concerning ATMs is expected to be completed this week.
Emphasizing a zero-tolerance stance towards price increases for products not under price cap, Nagy mentioned ongoing discussions with retailers regarding pricing policies following the potential removal of caps.
Furthermore, he addressed scrutiny regarding asset management, stating that any investigations will clarify ownership and highlight possible illegal conduct within organizations.
He asserted that significant consequences follow any discrepancies identified in the ruling party, noting he has yet to review a recent audit report.
This revised figure aligns closely with the Hungarian National Bank's prediction of 2.4%.
Concurrently, the government projects an inflation rate of 4.5%, slightly lower than the bank's estimate of 4.8%.
Looking ahead to 2025, MBH Bank anticipates a growth rate of 2.6%, whereas UniCredit Bank's forecast is more pessimistic at 1.8%.
Minister Nagy emphasized that preparations for the 2026 budget are already underway, with a new macroeconomic proposal developed by the Ministry of Finance expected to be completed by summer.
He projected that the third quarter of this year could see GDP growth exceeding 3%, with potential for growth to reach 4% in the fourth quarter, suggesting a quickening pace in economic expansion.
The ministry's forecasts highlight a significant consumer trend, with retail sales expected to move into the 5% to 10% range by the third quarter.
Nagy pointed out the importance of large factories joining the national economy, with most investments in the corporate sector aimed at capacity enhancement, while small and medium enterprises focus on improving efficiency.
Despite a noted strengthening of internal economic conditions, external factors remain challenging, particularly from Germany, which has altered its debt brake rules.
Nagy noted that the German economy could grow by 1% this year, thereby significantly impacting Hungary's economic landscape.
However, he cautioned that Hungary's exports might remain negative despite external demand strengthening.
In reference to inflation, Nagy labeled it as a 'near enemy,' reiterating that the government will continue to disburse pension premiums within the year.
The government is particularly concerned with inflation in the food, banking, and telecommunications sectors.
He indicated that there is a strong possibility of implementing price caps in banking services, highlighting the complexity of negotiations in this sector.
Discussions with telecommunications firms are set to take place, focusing on voluntary price reductions in this area.
The price cap's effects have been significant, with the government calculating that it led to price decreases for 884 products, although it also recorded price increases for 70 products, attributed to the culmination of previous promotions.
March food inflation could reach 7%, with expectations that it will decline to around 5% in April.
Additionally, the government anticipates a real wage growth of 4% this year, with the private sector average salary projected to reach HUF 1 million by December 2028.
No modification to the base budget plan is anticipated due to the subdued growth outlook.
A legislative package concerning ATMs is expected to be completed this week.
Emphasizing a zero-tolerance stance towards price increases for products not under price cap, Nagy mentioned ongoing discussions with retailers regarding pricing policies following the potential removal of caps.
Furthermore, he addressed scrutiny regarding asset management, stating that any investigations will clarify ownership and highlight possible illegal conduct within organizations.
He asserted that significant consequences follow any discrepancies identified in the ruling party, noting he has yet to review a recent audit report.
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