European Commission sees Hungary economy contracting 7 pc in 2020 – UPDATE

The European Commission forecasts a 7 percent slump in Hungary’s economy this year followed by a 6 percent rebound in 2021.

The novel coronavirus pandemic hit Hungary after years of above-average growth, the EC’S spring report released on Wednesday notes.

Although the virus has spread only to a limited extent in Hungary, this year’s economic performance would depend on domestic economic policy decisions, the EC said.

The pandemic hit hardest the tourism and transport sectors, which make up half of the services sector in the country. The international recession may badly impact the Hungarian processing industry, despite relatively mild restrictions in the industrial sector, it added.

Investments are expected to fall by 18.7 percent before rebounding by 8.9 percent in 2021.

Inflation is set to decline to 3.0 percent from last year’s rate of 3.4 percent.

The budget deficit is seen jumping to 5.2 percent of GDP from 2.0 percent last year due to a fall in tax revenues. The EC put the deficit at 4.0 percent for 2021.

The public debt-to-GDP ratio is expected to rise to 75.0 percent before declining to 73.5 percent next year.

Hungary’s government projects a GDP fall of 3 percent this year. But it is also prepared for a sharper drop if the pandemic drags on into the third or fourth quarters.

As we wrote yesterday, Hungary’s finance ministry submitted an updated convergence programme to the European Commission that envisages a 3 percent GDP contraction in 2020 in light of the coronavirus crisis, read details HERE.

European Commission forecasts historic recession for 2020

The European Commission said in an economic forecast that despite policy response at both European Union and national level, the EU economy will experience a recession of historic proportions this year due to the coronavirus pandemic.

It projects that

the euro area economy will contract by a record 7.75 percent in 2020 and grow by 6.25 percent in 2021.

The EU economy is forecast to contract by 7.5 percent in 2020 and grow by around 6 percent in 2021.

Source: MTI