Hungary’s economy will shrink by 1.3 per cent this year, the European Bank for Reconstruction and Development said in a quarterly report this week. Falling domestic consumption and the unwillingness of banks to lend are dragging Hungary into a new recession, the report said. The bank predicts that growth next year will be limited to 0.4 per cent, instead of the 0.7 per cent it forecast three months ago.
The government has based its draft budget for 2013 on expected growth of 1.6 per cent, a figure that the International Monetary Fund – currently engaged in bail-out negotiations – considers overly optimistic. The government’s negotiator, Mihály Varga, has acknowledged that differences of opinion over the macroeconomic outlook for 2013-14 need to be settled during talks.