Page 25 - CE Outlook Regions 2023

2.3.1 GDP growth

Growth remained robust in the first nine months, climbing 6.1% y/y
boosted by massive pre-election transfers. Broken down by quarters,
economic growth has been on a descending path with an 8.0% growth
in Q1, 6.5% in Q2 and 4.0% in Q3. Hungary was among the
fastest-growing economies in the EU on an annual basis in Q1-Q3, but
quarterly data in the July-September period showed a contraction of
0.4%.

For 2023, most analysts and international organisations expect
Hungary to escape a recession, with growth close to zero, with risks
skewed to the downside. The forecasts assume the absorption of EU
transfers from H2 2023.

The European Commission in its latest report raised its 2022 growth
guidance from 5.2% to 5.5% but cut its 2023 estimate to 0.1% from
2.1%. The IMF projected that growth will decelerate from 5% in 2022 to
near zero in 2023 as high inflation will erode households’ real income,
while higher funding costs will weigh on investments and external
demand weakens. The projections assume that Hungary can unlock EU
funds. The delay or lack of transfers could derail the country’s economy
and lead to recession.

The Hungarian central bank revised its macroeconomic outlook in
September, putting GDP growth at 3-4% in 2022, down from 4.5-5.5%
in the June report. The 2023 outlook was revised down from 3-4% to
0.5-1.5%, with downside risk from high energy prices and the
dampening of private consumption from a deceleration of real wages.
The 2022 and 2023 forecasts were confirmed in the latest quarterly
report published on December 20.

Hungarian central bank governor Gyorgy Matolcsy warned that the
county faces stagnation and stagflation unless the government
implements a turnaround in its economic policies. The former economy
minister unleashed a scathing criticism of the last 10-12 years, saying
Hungary is one of the least competitive countries in the EU, and he

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