Global inflation has started to decline, inflation is past its peak and consumer price growth in Hungary could return to single digits by the end of next year, Barnabás Virág, deputy governor of the Magyar Nemzeti Bank (MNB), said during an online discussion on Tuesday.
He said inflation could be characterized by a “protracted peak” in the first months of next year. He confirmed that inflation would still rise in Hungary in December as a result of two effects: the abolition of the price cap on fuel will add 2.5 percentage points, 80 percent of which, or 2 percentage points, will be reflected in the December inflation data. The other factor will be the high level of repricing. Inflation in December could be in the range of 26-27 percent and remain similar in the first quarter of 2023, the deputy governor said, adding that a noticeable decline in the indicator could occur in the second half of 2023.
Barnabás Virág underlined that the central bank’s targeted measures have been effective in mitigating market risks, with the current interest rate conditions almost ensuring the sustainable achievement of the inflation target.
The inflation trajectory is higher than it was anticipated in September: 14.5-14.7% in 2022 and 15.0-19.5% in 2023. Inflation is expected to fall to single digits by the end of 2023, returning to the central bank’s tolerance band in 2024.
In his forecast, the vice president continued to cite the Russian-Ukrainian conflict as the biggest source of risk.
The central bank expects GDP growth of 4.5-5 percent this year, followed by a meaningful slowdown in 2023, when growth could be 0.5-1.5 percent.
According to Barnabas Virág, corporate profitability has improved significantly, with price increases outpacing cost increases. In 2023, he also expects exports to replace domestic demand items as the key to maintaining growth and keeping the Hungarian economy in positive territory. “Every economy in Europe is struggling to make it to 2023 with a positive balance,” he said, but domestic demand would be able to reconnect with growth from 2024-2025.
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