After improving by 8 points in April, the GKI economic sentiment index fell by 5 points in May. This is a very significant fluctuation, but the May figure is about the same as a year earlier. According to the empirical survey conducted by GKI Economic Research Co. (www.gki.hu) with the support of the EU, business expectations fell by around 5.5 points in May and consumer expectations by 9.5 points. This is a return to the otherwise upbeat view of recent months, after the over-optimism of April. An exception is the assessment of the future of the national economy, which was worse in the last ten years only at the beginning of the Covid pandemic and during the austerity of the Széll Kálmán plan.
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GKI economic sentiment index reached its three-year peak in April
In April, GKI’s economic sentiment index jumped to its level in spring 2019, well before the COVID crisis. This level has only been reached in one month since the crisis, in October 2021. According to the empirical survey conducted by GKI Economic Research Co. (www.gki.hu) with the support of the EU, economic expectations improved in all sectors and among consumers as well. In April, the concerns following the Russian attack on Ukraine almost disappeared, and these concerns were almost only echoed by the declining, but still high, pessimism about the future of the Hungarian economy.
Slowing economic growth, accelerating inflation, eastern closing
The war launched by Russia against Ukraine and the resulting widespread international economic sanctions are forcing the global economy, including the Hungarian economy, onto a new economic path, which can only be forecast with great uncertainty in both the short and medium term. In the short term, the most striking are the sharp spike in inflation, the general stock market fall, the general depreciation of the dollar, and the instability of global supply chains (from energy to food, raw materials and components). The latter confront governments with the need to rapidly develop a new system of world economic relations, especially in the medium term, while taking into account environmental considerations.
In March, consumer expectations deteriorated spectacularly due to Russia’s war against Ukraine, while business expectations deteriorated less
GKI’s economic sentiment index fell in March to its late spring 2021 level, mainly as a re-sult of a deterioration in the consumer confidence index. According to the empirical sur-vey conducted by GKI (www.gki.hu) with the support of the EU, business expectations worsened only in industry and services, but not in construction and trade. Across all sec-tors, the perception of the Hungarian economy became dramatically more pessimistic, as it was when the Covid pandemic broke out, but companies barely perceive this in their own situation.
Companies’ efforts to increase prices did not ease in February either
GKI’s economic sentiment index fell in February after a January rise, within the statistical margin of error. According to a survey conducted by GKI Economic Research Co. with the support of the EU, business expectations deteriorated, especially in industry, whereas consumer expectations improved slightly. The intention of the business sector to in-crease prices further strengthened, especially among service companies, which became more optimistic in all respects in February.