In January, GKI’s economic sentiment index rose marginally, but for the third month in a row. According to the empirical survey conducted by GKI Economic Research Co. with the support of the EU, the overall improvement in the consumer confidence index during this quarter is still within the statistical margin of error and remains below the panic levels seen at the onset of the Covid pandemic. The rise in the business confidence index is slightly more noticeable, at a level broadly similar to two years ago. Both companies and households were much more optimistic about the outlook for the Hungarian economy than in December.
Business and consumer expectations improved modestly in December. According to a survey conducted by GKI Economic Research Co. with the support of the EU, the rise in the business confidence index was solely due to a significant improvement in industrial expectations, as other sectors became more pessimistic to a greater or lesser extent. The consumer confidence index has been rising, albeit marginally, for the second month in a row. However, households remained more pessimistic than during the Covid-related panic in spring 2020. The views of businesses and households on employment and inflation were unchanged in December, but both businesses and households saw the future situation of the Hungarian economy as worse than in November.
Hungary’s GDP fell by 0.4 per cent in the third quarter of 2022 compared with the previous quarter, bringing the Hungarian economy close to a technical recession. GDP is still growing at an annual average rate of 5.2 per cent, but the rate is falling by around 2 percentage points per quarter, with a decline of 1-1.5 per cent expected in 2023.
The business confidence index fell slightly further in November after a big drop in October. Con-sumer sentiment, on the other hand, improved slightly, although it remained gloomier than its terrible pessimism of September. According to a survey conducted by GKI Economic Research Co. with the support of the EU, business expectations were similarly negative during the Covid period of early 2021. Consumers were still more pessimistic than they were in the Covid panic of spring 2020. The good news, however, is that the business sector’s willingness to employ slightly strengthened, its intentions to raise prices weakened, while consumers’ fear of unemployment and inflationary expectations also changed in a favourable direction.
GKI’s current forecast was made in a context of even greater uncertainty than usual, and understanding trends was complicated by the sharp change in economic developments in the middle of the year. GKI raised its growth forecast for 2022 from 3.7 per cent to 4.5 per cent, while for 2023 it no longer forecasts a growth of 2.7 per cent, but a decline of around 3.5 per cent.