Economy to contract 6.5 percent in 2020

The European Commission published its autumn economic forecast on Thursday, projecting Hungarian GDP would fall by 6.5 percent this year. The projection is an improvement from a 7.0 percent decline in a forecast published in July.

The forecast expects Hungarian GDP to grow by 4 percent in 2021, a scale-back from the 6 percent estimated in July.

The economy is likely to expand further in 2021 and 2022, with a 4 and 4.5 percent projected GDP growth, respectively, the EC said.

Inflation is expected to be at 3.4 percent in 2020, 3.3 percent in 2021 and 3 percent in 2022, the forecast said.

The EC said economic activity in Hungary “rebounded vigorously” after a spring lockdown ended and global supply chains were restored, but added that the recovery was “set to pause” in the last quarter as the country would experience a strong second wave of the coronavirus pandemic.

Similar trends are expected in employment figures, the forecast said, noting that Hungary’s unemployment rate nearly reached last year’s level by August, with a mere 0.4 percent annual decline. However, the second wave is likely to bring new layoffs, they warned.

Hungary’s budget deficit will go up to 8.5 percent of GDP in 2020, but contract to 5.5 percent of GDP by 2021 due to a growing labour market, consumption and increased excise duties on tobacco products, the forecast said.

State debt is likely to grow this year to 78 percent of GDP from 65.4 percent in 2019, it said.

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