GKI’s economic sentiment index rose sharply in December. It almost reached its October level again, which was much more favourable than the April low, but had been at a fairly low level since the beginning of summer. According to the survey conducted by GKI Economic Research Co. with the support of the EU, the improvement was due to more upbeat business expecta-tions, and the pessimism of all sectors decreased significantly. The consumer confidence index, on the other hand, fell sharply in December after a minimal rise in November. The fact that households are always asked at the beginning of the month and companies in the middle of the month might play a role in the different trends of consumer and business expectations in the last two months. Thus, households did not yet perceive the restrictions caused by the pan-demic in early November, whereas a significant number of companies responded in December with the knowledge of the agreement with the EU.
According to the HCSO, economic developments picked up significantly in the third quarter of 2020 compared to the previous one, faster than expected. However, we already know that the fourth quarter will certainly be significantly worse. This is due to the second wave of the pandemic, the dampening effects of restrictive measures on supply and demand, and the impact of all this in deteriorating economic expectations.
GKI’s economic sentiment index fell sharply in November, falling below its level in early summer. According to a survey conducted by GKI Economic Research Co. with the support of the EU, this is a consequence of falling business expectations. The consumer confidence index rose minimally recently, although due to its decline in the previous three months, it also fell short of its June level (within the statistical margin of error). Households were interviewed in early November and companies in mid-November.
After a two-month decline within the statistical margin of error, GKI’s economic senti-ment index rose slightly in October; however, it still did not reach its July level. According to a survey conducted by GKI Economic Research Co. with the support of the EU, the im-provement in October was the result of more favourable business expectations, and a modest increase followed two months of stagnation. However, consumer expectations have been deteriorating for the fourth month in a row. As a result, GKI’s economic sen-timent index offset almost exactly half of its April fall by October.
In mid-March 2020, GKI outlined two scenarios with a GDP fall of 3 per cent and 7 per cent, respectively in its forecast for 2020. At that time, even the first scenario was a very pessimistic prognosis. In June, GKI ruled out the possibility of a 3 per cent recession and set the expected rate of decline in the 5-7 per cent range. Owing to another wave of the pandemic, GKI now, in September 2020, considers only the -7 per cent forecast to be viable, adding that not only a better but also a worse situation may develop. After a 6.1 per cent decline of GDP in the first half of the year (and a 13.6 per cent in the second quarter), GKI expects a contraction of around 8 per cent in the second half of 2020. The rate of GDP decrease may have reached around 7 per cent in the third quarter (when the impact of the pandemic was smaller) and around 9 per cent is projected in the fourth quarter, based on available limited data and the GKI economic sentiment index. GKI still expects a 4.5 per cent recovery in 2021, with high uncertainties, and assumes that growth will only start in the second quarter compared to the same period last year. The Hungarian economy will probably reach the GDP level of 2019 only in 2022. The change in Hungary’s GDP is expected to be slightly more favourable than the EU average; however, in a regional comparison it will be only weak-medium.