Hungary's recession is set to be deeper than expected this year, owing to the deteriorating eurozone outlook and the ongoing deleveraging process, London-based emerging markets analysts said on Wednesday.
In its revised forecast for the Central and Eastern European region released to investors in London, Morgan Stanley said it now expects Hungary's economy to contract by 1.2% in 2012 against its previous call for a 0.3% fall. For 2013, Morgan Stanley now sees growth of just 0.7%, down from 1.7% in its earlier forecasts. "Weak growth will likely reinforce the NBH's desire to cut rates, and we now see rates falling all the way to 5%". The government projects GDP growth to slow from 1.7% in 2011 to 0.1% this year but to pick up to 1.6% in 2013.