The European Bank for Reconstruction and Development (EBRD) raised its forecast for Hungary’s GDP growth this year to 7.7 percent in a biannual report published on Thursday.
The forecast was raised from 5.5 percent in the previous Regional Economic Prospects report, published in June. Hungary’s government anticipates growth of around 7 percent for 2021. First-half GDP growth reached 7.6 percent. The EBRD sees Hungary’s GDP growth
slowing to 4.8 percent in 2022.
The EBRD said a minimum wage rise of close to 20 percent and a personal income tax rebate, both scheduled for 2022, are expected to boost household consumption. Higher energy prices and the semiconductor shortage are negatively impacting the manufacturing sector, especially the automotive segment, which is expected to weigh on Hungary’s exports in the short term, it added.
Investments co-financed with European Union funding are likely to boost the post-crisis recovery, the EBRD said, noting that the government recently issued the equivalent of 4.5 billion euros of FX bonds to pre-finance projects while the country waits for its Recovery and Resilience Facility (RRF) plan to be approved.
Meanwhile, the number of home building permits issued in Hungary rose by an annual 29.8 percent to 22,430 in the first three quarters even as the number of new projects in the capital declined, data released by the Central Statistical Office (KSH) on Thursday show. The number of home building permits issued in county seats and cities with populations over 50,000 rose by 43.2 percent to 4,474 and the number in smaller cities increased by 56.9 percent to 7,452. The number issued in towns was up 59.9 percent at 6,289.
In Budapest, the number of home building permits fell by 22.9 percent to 4,215.
The finance ministry has lowered its projection for GDP growth this year to 6.8 percent against the backdrop of higher energy prices, inflationary pressure and the impact of the fourth wave of the pandemic, Finance Minister Mihaly Varga said at a conference organised by the Hungarian Insurers Association (MABISZ) on Thursday. Earlier, the ministry had put this year’s GDP growth at 7-7.5 percent.
Varga said rising energy prices would “significantly restrain” the performance of European economies, parallel with higher inflation, while the economic impact of the fourth wave of the pandemic, albeit smaller than that of the second and third waves, would still be felt. He noted that Hungary is one of just ten countries in the European Union whose economies have recovered to pre-pandemic levels.