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EC stands by forecast for 7% economic contraction in Hungary

The European Commission projects Hungaryʼs GDP will fall 7% this year in a summer economic forecast published on Tuesday, unchanged from a forecast released early in May, according to a report by state news wire MTI.

The EC said household consumption is set to decline because of the hit to labour income and higher precautionary savings, while investments are projected to "plummet", adding that "several ongoing projects are likely to be cancelled or put on hold" because of the recession. Hungarian companiesʼ specialisation in "highly cyclical products", such as those turned out by the automotive industry, and constraints in tourism because of physical distancing measures are expected to result in a sharp drop in exports, the EC said.

The EC also repeated its earlier projection for the scale of the expected rebound in 2021, forecasting GDP growth of 6%.

Consumer prices are set to rise 3.5%in 2020, lifted by high food prices, then fall to 2.8% in 2021, according to the forecast.

The EC projects steeper economic contractions for a number of Hungaryʼs neighbours in the summer forecast.

It changed its forecast for the decline in GDP in the Czech Republic this year to 7.8% from 6.2% in the spring forecast. The projection for Poland was changed to 4.6% from 4.3%, and the forecast for Slovakia was modified to 9% from 6.7%.