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EC lowers Hungary 2022 GDP growth forecast to 5%

Analysis

The European Commission lowered its projection for Hungary's GDP growth this year to 5% in an interim forecast released on Thursday, according to a report by state news wire MTI.

The projection was knocked down from 5.4% in the EC's comprehensive autumn forecast published in November.

The EC acknowledged "significant" stimulus measures that aim to boost consumption in 2022, including a one-off personal income tax rebate for families raising children and large public sector wage increases, but said high inflation is "eroding households' purchasing power and denting consumer confidence".

Investment expansion will be "limited" by a reduction in this year's general government deficit target, relative to GDP, from 5.9% to 4.9%, although export growth is set to "remain dynamic" as supply chain problems ease and international tourism recovers, the EC said.

Hungary's Finance Ministry earlier projected the economy would expand by 5.9% in 2022.

The EC puts Hungary's GDP growth at 3.2% for 2023, as economic activity "returns to its pre-pandemic trend".

The EC raised its projection for average annual inflation this year to 5.4% from 4.8% in the fall forecast on the back of higher production costs.

It noted that consumers have been "shielded" from wholesale energy price increases by a regulated household utilities price scheme and a temporary cap on vehicle fuel prices, but pointed to climbing core inflation which reflects "broad-based inflationary pressure".

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