In the current situation, GKI considers it difficult to make any detailed forecasts. Therefore, it only undertakes to present the possible main trends based on two scenarios. The COVID-19 is already a worldwide pandemic; however, its depth and duration are completely uncertain. While the Chinese economy is starting to show signs of recovery, COVID-19 is now spreading in Europe, and strict measures are being introduced to restrict the movements of people. The general downturn in the world’s stock exchanges, with occasional positive corrections, illustrate a climate of general fear and uncertainty.
Surprisingly, the GKI economic sentiment index dropped hardly in March, business expecta-tions worsened slightly, and consumer ones remained unchanged. This is obviously due to the fact that the survey, conducted by GKI (www.gki.hu) with the support of the EU, was con-ducted at the usual time, between March 1 and 8 for consumers and between March 5 and 13 for businesses, before the coronavirus emergency announced on March 11. However, for the first time in six and a half years, business expectations became again negative, meaning that slightly more companies expected the future to be worse than good. On the other hand, the assessment of the Hungarian economy’s prospects plummeted similarly as they did in Octo-ber 2008.
The Hungarian economy expanded by 4.9 per cent in 2019. It was the second fastest growth rate in the EU after Malta, almost 3.5 percentage points higher than the EU average of 1.5 per cent. If the growth rate will be 3.5 per cent in 2020 as forecast by the Ministry of Finance after taking into account the expected slowdown, the Hungarian growth requirement set by the government of at least 2 extra percentage points compared to 1.4 per cent in the EU can be achieved. At the same time, macroeconomic equilibria are worsening, inflation is accelerating, and the forint is falling spectacularly. The true extent of the short- and long-term effects of the coronavirus cannot be assessed yet.
Households’ short-term home renovation and modernization plans (refer to the coming year) did not change much compared to the previous quarter, slightly decreased on an annual basis, but they are positive. According to the intentions of the inhabitants, about 11% of the Hungarian housing stock will be renovated in the next year, and about 20% in the coming three years. Most of the respondents are preparing for painting, daub or paper-hanging (every seventh apartment may be painted in the next three years), but renovations improving energy efficiency are also popular (almost every tenth apartment can be renovated this way).
In February, GKI’s economic sentiment index stayed virtually at its January level, that is, at its 40-month low. Business expectations deteriorated slightly, whereas consumer ones im-proved somewhat. The business confidence index has been on a downward trend for one and a half years. The consumer confidence index was fluctuating and stagnating during this period of time. Although this year it was in the lower zone of the narrow band characteris-tic of the past two years, it still reflects strong optimism.