"In fact, Hungarian public debt has been consistently below the EU average since 2010."Continue reading
The head of the Directorate Economic Forecast and Analysis of the Hungarian National Bank (MNB, central bank) presented the March Inflation Report at a press conference on Thursday. Inflation peaked in February, consumer price inflation will average between 4.5-5.1 percent in 2025, and will fall back into the central bank’s tolerance band in early 2026, András Balatoni said.
The MNB raised its inflation forecast for this year, adjusting it to 4.5-5.1 percent from the 3.3-4.1 percent range expected in December. At the same time, the central bank revised its GDP growth forecast from 2.6-3.6 percent in December to 1.9-2.9 percent in 2025, in its latest Inflation Report.
The report projects inflation to range between 2.9-3.9 percent in 2026, and 2.5-3.5 percent in 2027. GDP growth could be between 3.7 and 4.7 percent next year and between 2.8 and 3.8 percent in 2027.
András Balatoni explained that
inflation has been on an upward path since September, which is not a unique phenomenon, but a global trend.
He noted that domestic food prices have been significantly exposed to food price increases on the world market. They expect a continued spill-over of rising world food prices, temporarily restrained by the restriction of food price increases.
He pointed out that growth in external trade partners is expected to pick up from this year. Consumption will continue to expand throughout 2025, and could continue to drive growth going forward. This is underpinned by rising real wages and government tax cuts. Large capacity expansion investment projects in industry in recent years could start production in late 2025, and during 2026.
In the short term, external demand remains subdued, while in the medium term, the strengthening European economy will boost domestic exports,
he said.
They estimate that the newly introduced tax measures could leave families and pensioners with a surplus of 0.1% of GDP in 2025, 0.5% in 2026, and 0.7% in 2027.
The full budgetary impact could be felt by 2029, with the gradual extension of the benefit for mothers with two children.
The current account surplus is expected to remain persistently large, ranging from 1.2-2.6 percent of GDP in 2025, 1.8-3.4 percent in 2026, and 2.0-3.8 percent in 2027.
He added that the fiscal deficit and debt ratio are expected to decline, with preliminary data showing gross public debt at 73.8 percent of GDP at the end of 2024. The debt ratio will continue to decline in the coming years, even with the revised deficit target of 2026. The public debt-to-GDP ratio is projected to decline to 73.2 percent by the end of 2025, and below 69 percent at the end of the forecast horizon.
Alternative risk scenarios were also discussed, he said. The risk scenarios that assume an increase in trade tensions and a deterioration in emerging market sentiment are consistent with higher inflation and a lower growth path. The scenario foreseeing an easing of geopolitical tensions is consistent with stronger economic growth and lower inflation than the baseline. In the scenario assuming a fiscal stimulus in Europe, both growth and inflation paths could be higher.
Via MTI, Featured image: Pixabay