Hungary could be the black sheep of the region

According to an analysis by the Vienna Institute for International Economic Research (WIIW), in the Central and Eastern European region, only the Hungarian economy is expected to shrink in 2023. According to the institute, the fiscal situation could serve as a significant issue. Besides that, the fate of EU funds is uncertain, which could further weaken the forint.

Ominous analysis

In 2023, the Hungarian GDP could fall by half a percent compared to last year. WIIW’s forecast suggests that the Hungarian government’s efforts to avoid a downturn in economic performance are futile but inevitable.

The Vienna-based economic research institute expects growth in all the countries surveyed, even for Russian GDP. In the immediate region, the Czech, Polish, Slovakian and Romanian economies could also expand this year.

Even more ominously, the analysis shows that Hungary’s economy will perform the worst in Central and Eastern Europe in the coming years.

Inflation, lack of EU funding, weakening forint

According to portfolio.hu, inflation will remain high this year. On average, Hungarians can expect an annual inflation rate of 18.5 percent. In 2024, it could drop to 8 percent, then to 5 percent. Similarly like in other countries, rising energy prices could explain the rate of inflation, but Hungary’s ailing agriculture could also be a reason. Food information in particular could hurt the population.

Another problem is the uncertainty of EU funding, which also affects the budget. The Hungarian government’s frequent anti-EU propaganda is stronger than ever in the media, analysts say. They also note that the government is not fully committed to addressing the contested rule of law issues. And what has been done so far is not sufficient for the European Commission.

According to the analysis, Brussels isn’t pleased with the lack of effort and that could lead to the suspension of EU funds. If tensions are not eased, this could mean further losses, which will be reflected in the forint exchange rate. Not long ago, the situation has already escalated to a level where one euro was valued at HUF 430, but the average euro exchange rate could rise again to 430 by 2025.

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