Hungary’s economic rebound will be modest this year, around 2%, and the return to potential growth is set to be postponed to 2025 with GDP expanding around 3.2%, according to
Battery manufacturing capacities will partly counterbalance the drop in external demand in 2024, but due to low domestic value added and the import need of these investments, the final GDP effect will be low, it added.
The 2024 growth projection for
The budget deficit will reach 5.7% of GDP in 2024, 1.2pp higher than the government’s unofficial budget deficit target. A lower deficit would be achieved only if government subsidies making up around 1.5% of GDP are reduced this year, yet it would require a massive primary surplus as debt service costs will exceed 4% of GDP in 2024.
Hungary’s public shortfall will edge lower to 5% of GDP in 2025, 1.3pp above the cabinet’s target. There is a risk of an excessive deficit procedure (EDP) launched by the
The widening of the budget gap has increased the country’s funding needs significantly this year and
The bank lowered its year-end CPI forecast to 5.7% in 2024 and 3.2% in 2025. It put average annual inflation at 4.5% and 4.4% respectively.
The hawkish position of the
Although a quick adjustment in Hungary’s current account position and a strong FDI pipeline may further improve Hungary’s basic balance in 2024-25, policy risks will likely weigh on the HUF. It also warned of the policy frictions between fiscal and monetary policy until 2025, when the government will likely nominate a new central bank governor.
The sharp decline in positive carry offered by the forint has been triggering capitulation in carry trade positions built up over the last two years.
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