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Due to global uncertainty, the US and European central banks have revised their inflation forecasts upwards, while moderating their growth expectations, said Mihály Varga on Wednesday at the European Central Bank’s (ECB) annual conference in Sintra, Portugal.
The National Bank governor added that in the current uncertain times, it is particularly important that the Hungarian economy can count on a stable banking system. Mihály Varga pointed out that the European growth outlook is modest due to global uncertainties: based on the European Commission’s forecast, GDP growth of 1.1 percent is expected in the European Union this year and 1.5 percent in 2026. The Commission believes that the European economy has remained resilient despite all the difficulties, but downside risks are likely, the central bank governor added.
He said that in view of external risks, the Hungarian National Bank (MNB) had also revised its economic growth forecasts: it expects the Hungarian economy to expand by 0.8 percent this year.
The moderate economic performance across Europe is due to global uncertainties, particularly the transformation of world trade and international supply chains, U.S. customs policy, and growing geopolitical tensions, Varga explained. He added that despite all the uncertainty, slight growth is expected in Hungary, mainly due to the expansion of domestic consumption and the continuing stability of the labor market.
The central bank governor also noted that the two-day conference provided an opportunity for central bank leaders from around the world to discuss banking supervision issues. In recent years, the banking sector has successfully supported economic growth across Europe, while banks themselves have become increasingly resilient to crises. Varga emphasized that although the tense global geopolitical environment is testing the resilience of European banks, domestic financial institutions remain well capitalized and have ample liquidity. For this reason, the Hungarian National Bank is working with banks to stimulate corporate lending, which plays a key role in promoting sustainable economic growth, the central bank governor added.
Via MTI; Featured photo: Facebook/ Mihály Varga