Pace of inflation expected to start gradually easing, central bank says

To a large degree, inflation is expected to be driven by factors outside of the scope of monetary policy, central bank director Andras Balatoni said on Thursday, presenting the NBH’s latest quarterly Inflation Report.

Disinflationary effects will start showing up in the first half of 2023 and become more pronounced in the second half of 2023, he added.

Headline inflation will fall to 4 percent, the upper threshold of the National Bank of Hungary’s tolerance band, in the first half of 2024, he said.

Annual inflation this year is expected to average 15.0-15.5 percent, before declining to 10.6-12.9 percent in 2023 and 2.6-3.5 percent in 2024, the report shows.

The bank expects economic growth at 3.0-4.0 percent in 2022, slowing to 0.5-1.5 percent in 2023 and then picking up to 3.5-4.5 percent in 2024.

It projects a decline in investments and in household consumption expenditures in 2023. Household savings are also expected to fall temporarily.

Balatoni said Hungary’s current-account deficit would “rise markedly” in 2022 owing to higher energy prices.

The NBH forecasts a current-account deficit equivalent to 7.7-8.7 percent of GDP for 2022 and a gap of 5.8-7.0 percent for 2023.