The OECD predicts a slowdown in Hungary’s growth to 5 pc in 2022

The OECD estimated that fiscal policy would “remain expansionary” in 2022, before “consolidating gradually” in 2023.

The budget deficit is expected to be 7.5% of GDP in 2021 and 5.8% in 2022, according to the report.

The OECD said structural reforms should focus on increasing potential growth and that labor taxes should be lowered further to help address labor shortages.

Hungary’s economic output grew 6.1 percent per year in the third quarter, down from 17.8 percent in the previous quarter, the Central Statistical Office (KSH) said on Wednesday, confirming its preliminary data.

GDP in the third quarter grew at the same rate after adjusting for calendar year and seasonal effects.

Quarter over quarter, it edged up 0.7%.

During the period Q1-Q3, the economy grew by 7.1% per year.

Due to spare parts supply bottlenecks, the energy crisis and new waves of the pandemic, analysts told MTI that economic growth could slow further.

Peter Virovacz of ING Banks said the data clearly showed that the rapid recovery had halted in its tracks and negative external factors had hit the Hungarian economy. The new wave of Covid could have an extreme impact on the economy in the coming quarters, he added. Both industry and construction are grappling with global supply chain issues, and that is expected to continue, he said. Services are the only engine of growth, although this could also be hampered by downtime due to Covid.

In the absence of public spending in the fourth quarter or first quarter of 2022, Hungary’s economic growth could slow significantly, he added.

GDP growth of around 7% in a full year was possible, he said, adding that the growth risks for next year had increased significantly.

Gabor Regos of the Szazadveg Institute said third-quarter data underperformed expectations, adding that the declines in the agriculture and education sectors were surprising. A decline in net exports slowed growth considerably. Without the worsening trade balance, growth could have approached 10 percent, he added. Full-year growth could exceed 6.5% and reach around 5.5% in 2022, he said.

Janos Nagy of Erste Bank said the economy is likely to slow further in the fourth quarter, with lower external demand being one of the main drivers of this trend. He cited high energy and commodity prices and the uncertainty behind the omicron variant for the negative outlook. Experts from Erste Bank predict economic growth of 6.7% for the whole year, he added.

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