Economic research company Századvég lowered its projection for Hungary's GDP in 2012 to a 1.0% contraction in a fresh forecast on Monday from 0.1% growth in the previous one in March.
Századvég said GDP would decline because of stagnating consumption, a significant decline in investments, and efforts to maintain the fiscal deficit target.
Századvég projected GDP growth of 0.9% in 2013, down from a 1.5% forecast in March.
The company said the government would have to reduce expenditures by a further HUF 350 billion to reach its 2013 deficit target.
Századvég puts average annual inflation at 5.7% for 2012 and 4.3% for 2013.