Page 31 - CE Outlook Regions 2022

2.3.1 GDP growth

Hungary's economy has rebounded from the pandemic fast
thanks to unprecedented fiscal stimulus, including massive
government loan programmes for companies for investments and
to retain labour forces.

The economy returned to the pre-crisis levels in Q3 2021, earlier
than anticipated. Job protection schemes have helped minimise
the risks of mass unemployment and the labour market
rebounded swiftly, and now labour shortages pose one of the
biggest constraints for future growth.

Hungary’s National Bank has taken its share of the crisis
management, injecting HUF11 trillion (€29.9bn) into the economy,
including HUF3.5 trillion in subsidised loans.

In the first part of 2021, Hungary’s export-oriented industry was
the main driver of growth, but household consumption and public
investments played an important role as the economy reopened.

Thanks to the fast rollout of vaccines, Hungary was one of the
first countries to open up its economy in late spring. While the
services sector bounced back in the summer, global supply chain
disruptions dampened GDP growth in H2.

As the year drew to a close the finance ministry slashed GDP
forecasts in two steps in less than six weeks from 7-7.5% to
6-6.5%, citing the impact of the global chip shortage, higher
energy prices and the fourth wave. The government has been
reluctant to impose any restrictions in the deadly fourth wave
because of the economic fallout.

Overall, the country would still rank among the fastest-growing
countries in the EU in 2021 with a GDP increase of over 6%. In
its autumn forecast, the EC raised Hungary's GDP growth
expectation for 2022 to 5.4% from 5%, broadly in line with the
government’s projections and that of analysts.

In the December quarterly inflation report, the National Bank
revised 2021 and 2022 targets to 6.3-6.5% for 2021 and 4-5% for
2022.

Domestic consumption will be a key component of growth in 2022
thanks to the massive election-year fiscal stimulus to households,
but global supply chain disruptions could pose risks. Output is
expected to return close to its potential in 2023, slowing to 3.2%,
according to the EC.

There is a consensus that supply chain problems and surging
energy prices pose the biggest downside risks to 2022 targets.
Hungary’s export-oriented electronics and automotive sectors,

31 CE Outlook 2022 www.intellinews.com