Finance ministry: IMF acknowledges results of disciplined fiscal policy

The IMF’s latest forecast puts Hungary’s GDP growth at around 5 percent for 2022, making it one of the fastest-growing economies in the region, the ministry said in a statement. It also projects that inflation could decelerate to single digits by the end of 2023, the ministry added.

The budget deficit could fall to 3.5 percent of GDP next year, which would contribute to keeping debt on a downward path, the ministry cited the IMF as saying.

The IMF also acknowledged the government’s measures to ensure the security of the country’s gas supply, adding that diversification away from Russian gas will take time, the ministry said.

Meanwhile, the National Bank of Hungary said the IMF had acknowledged that the central bank had responded to inflation appropriately by significantly tightening monetary policy since June 2021.

In its statement, the IMF said it was crucial to maintain a consistently tight and credible fiscal and monetary policy in order to tackle inflation and reduce vulnerabilities from economic imbalances. As the Hungarian economy was recovering from the Covid crisis, it experienced a series of shocks which included supply-chain disruptions, rising energy and commodity prices, the Russia-Ukraine war and a drought, the IMF said. These shocks together with strong domestic demand contributed to a sharp rise in inflation and a current account deficit, it added.

But the central bank responded appropriately by significantly tightening monetary policy, the IMF said. This included raising the base rate, tightening liquidity and the measures introduced last month, the NBH said. It cited the IMF as saying that a tight monetary policy should remain in place “until inflationary pressures clearly and sustainably ease”.

The IMF also emphasised the need to maintain a tight fiscal and monetary policy mix in response to the high economic certainty.