Central bank report: Disinflation set to quicken

“The disinflationary effect of tight monetary policy, falling global commodity prices, declining domestic consumption and government measures to strengthen market competition is becoming increasingly apparent and disinflation will continue to accelerate,” policy-makers said in a summary of key findings in a quarterly report published on Thursday.

“Looking ahead, the continued fall in annual price dynamics is supported by both external and internal factors,” they added.

The report indicates headline inflation, which peaked at 25.7 percent in January, falling into the single digits by year-end and returning to the 2-4 percent tolerance band early in 2025.

The bank forecast average annual inflation in a range of 16.5-18.5 percent.

Andras Balatoni, a central bank director, said a drop in commodities and global food prices as well as freight costs had caused inflation to slow, adding however that core inflation was declining “slowly”.

He said headline inflation may fall to below 10 percent by year-end.

GDP growth is expected to pick up from the middle of the year as inflation falls, he said.

The bank expects the economy to grow by 0 percent and 1.5 percent this year and by 3.5-4.5 percent in 2024.

Balatoni noted a further improvement in Hungary’s external balances and said the current-account balance could improve over the entire forecast horizon and show a surplus by 2025.