The National Bank of Hungary (MNB) expects the economy to contract between 5.1% and 6.8% this year, state news wire MTI reports, citing forecasts from MNBʼs latest quarterly Inflation Report.
The central bank had forecast GDP growth of between 0.3% and 2% in the previous report released late in June, a relatively optimistic projection that assumed a V-shaped rather than a swoosh-shaped recovery.
The Finance Ministry expects GDP to fall 5.1% this year.
MNBʼs rate-setting Monetary Council acknowledged in a statement issued after a policy meeting on Tuesday that the economic recovery "is taking longer than earlier expected" because of the second wave of the pandemic.
The national bank puts the average annual inflation rate for this year at between 3.5% and 3.6% in the fresh Inflation report, higher than the 3.2%-3.3% range in the June report, but still within the +/- one-percentage-point tolerance band around the 3% mid-term inflation target.
The council said inflation was lifted in the summer as demand in certain sub-markets "soared", while disrupted supply in others only recovered slowly.
"Inflation is expected to stay close to current levels in September, before decreasing gradually towards the end of the year due to the fall in fuel prices and base effect," the policy makers said.
Developments in underlying inflation "are likely to be driven by the overall balance of supply-demand frictions related to the restart of the economy and the growing disinflationary impact of weak demand", they added.
MNB sees the economy bouncing back in 2021 and forecasts GDP growth of between 4.4% and 6.8% for 2021 and in the 4.5%-5.7% range for 2022.
Its forecasts for inflation show CPI at 3.4%-3.6% in 2021 and 3% in 2022.
MNB will publish its Inflation Report in full on Thursday.