Varga said the recovery in tourism and the entertainment industry will be much slower than earlier anticipated and there was also a chance of a second wave of infections.

"Our earlier forecast of minus 3% (for GDP) looks very optimistic, I think we can expect a worse figure, a recession of around 5%," Varga said, adding that the ministry would revise its earlier GDP projection.

Earlier data showed that Hungary's industrial output dropped by 30.7% on the year in May after a 36.8% plunge in April, as the volume of output dived across the board in manufacturing. The fall was especially significant in car manufacturing.

Hungary's open economy depends on vehicle manufacturing, which all but halted in March, and although car plants have since restarted production, still not all of them are running at full capacity.

Tourism came to a standstill in April and remained all but frozen in May.

German carmaker Daimler and Japan's Suzuki, as well as Audi, resumed production at their Hungarian units late in April. They began to increase shifts at their factories only in late May as the economy gradually opened up. [nS8N2BC02D nS8N2BC02G]

Analysts in a Reuters poll earlier this month projected the economy would shrink 4.35% this year.

The central bank still expects modest growth of 0.3% to 2% as it says investments are expected to rebound in the second half of the year, supported by a massive cheap loans programme.

By Krisztina Than