OECD Raises Hungary 2022 GDP Growth Forecast to 6%

Analysis

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OECD raised its forecast for Hungary's GDP growth this year to 6% in its biannual Economic Outlook published on Tuesday, according to a report by news agency MTI.

The forecast was raised from 4% in June.

The OECD projects Hungary's GDP growth will slow to 1.5% in 2023.

"The slowing reflects persistently high inflation, the economic fall-out of Russia's war of aggression against Ukraine, weaker external demand, and negative confidence effects," OECD said.

"Private consumption is likely to be dampened by increasing unemployment and a deceleration of real wages," it added.

OECD projects private consumption growth will slow to 1.1% in 2023 from 7.3% in 2022. It sees the jobless rate rising to 4.7% from 3.5% during the period.

The organization expects business investment to slow amid high interest rates and falling demand but said European Union funding would boost public investment and "partly offset" the deceleration.

Gross fixed capital formation is set to rise by 3.4% in 2023, slowing from 6.3% in 2022.

OECD puts average annual inflation at 13.5% in 2022 and 12.7% in 2023. It said further monetary tightening "may be warranted" to contain inflation, adding that "more [fiscal] restraint is needed" to reduce inflationary pressure.

The organization sees the general government deficit, relative to GDP, reaching 6.2% in 2022, then narrowing to 5.6% in 2023.

The publication said additional fiscal measures to manage the energy crisis should be focused on groups most vulnerable to higher energy prices and on improving the thermal efficiency of homes.

"A more competition-friendly regulatory framework would strengthen competitive pressures, foster new market entry and help spur the adoption of new technologies," it added.

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