Page 29 - CE Outlook Regions 2024

2.3.2 External environment
The energy crisis had a crippling effect on Hungary’s open economy, which relies on imports mainly from Russia. The country’s energy bill jumped from €7bn in 2021 to €17bn last year, while it is expected to stabilise around €9bn-10bn in 2023. The trade balance is set for a record €9bn surplus in 2023, due to the collapse of import-intensive consumption and investment-led expectations, besides lower energy prices. The current account deficit is also set to decline in parallel with the improvement of the trade balance, from 8.1% of GDP to around zero in 2023 and 2024. The slowdown of major European economies in 2024 could lower demand for Hungary’s export-oriented industry, in which the automotive industry has a 25-30% weight, but higher investments and consumption are expected to lift imports, narrowing the trade surplus. FDI inflow doubled in 2023 to €13bn in 2023 from €6.5bn a year earlier and exports are slated to increase from €142bn to €150bn this year, an all-time record.
2.3.3 Inflation and monetary policy
At the last rate-setting meeting of the year on December 19, Hungary’s central bank (MNB) cut the base by 75bp for the fourth straight month, which brought the rate the base rate to 10.75%, in line with projections, even as the 100bp cut was also on the table. The MNB began its monetary easing in May from 18% as disinflation gathered pace.
Hungary has had the EU's highest inflation rate for much of the year. Headline data peaked at 25.7% in January but thanks to the retreat of energy and raw material prices, the impact of monetary transmission and the collapse of domestic demand, CPI dropped to 7.9% in November. According to MNB’s forecast, it will ease to 6% in December, level with the regional average. In November, Hungary surrendered the title of highest inflation rate to Czechia in the EU.
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