In a press conference held on Monday, Hungarian National Economic Minister Márton Nagy announced new macroeconomic projections, revealing that both the government and the National Bank of Hungary (MNB) anticipate an average inflation rate of 4.5% and an economic growth of 2.5% for this year.

Nagy projected that economic growth could exceed 4% annually starting in 2026, with a significant GDP expansion expected in the latter half of this year, potentially surpassing 3% growth in the third quarter.

According to the Minister, a key contributor to this growth is the anticipated increase in household consumption, projected to expand by 4.1% this year and further increase to 5.2% in 2026. This surge in consumption is expected to be supported by rising real wages and the first steps of a doubling of family tax allowances, alongside a tax exemption for mothers of three or more children.

In the second half of 2023, the government forecasts that GDP growth will predominantly stem from household consumption.

Nagy emphasized that retail sales currently show a growth rate of 4-5% and could exceed 10% shortly.

The Minister also referred to changes in Germany's debt brake rules, suggesting that such changes could propel German economic growth, improving its GDP by up to one percentage point this year.

Meanwhile, Hungarian net exports are expected to remain negative, only contributing to economic growth post-2026.

Addressing the rising inflation, which has become a significant concern in Hungary, Nagy noted that food prices, banking services, and telecommunications are areas of focus.

Price caps have reportedly decreased average food prices by 18.1 percentage points within the regulated category.

However, he acknowledged the challenges in negotiating price limits with banks and mentioned future communications with major telecommunications companies, aimed at implementing voluntary price reductions.

The government anticipates that prices of nearly 884 out of 1,000 monitored products have decreased on average, although 70 products have seen price increases.

Significant efforts will be made against unjustified price hikes, with targets to maintain food inflation below 5% starting in March.

Further, Nagy confirmed that the current three-year wage agreement will not be renegotiated given the prevailing economic conditions.

He also mentioned that the possibility of removing the excess profit tax for the retail and banking sectors by 2026 is not expected.

In telecommunications, the government expects at least a 10% reduction in prices, as the current inflation does not justify recent price hikes approaching 20%.

Conversations regarding the expected price reduction in the telecommunications sector are scheduled, and nationwide access to ATMs will be enforced through forthcoming legislation.

Lastly, the Minister discussed ongoing negotiations regarding American tariff measures on individual companies, stating uncertainty regarding Hungary's outcome but noting the potential for benefits if companies relocate their operations.

He intends to finalize discussions regarding price reductions with banking and telecommunications providers by the end of this week or early next week.