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.

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The archive of earlier forecasts is available here.

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.

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You can reach the archive of survey summaries here.

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.

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You can reach the archive of survey summaries here.

GKI’s economic sentiment index closed last year with a decline and started this one with an improvement

After the contraction in November and December, GKI’s economic sentiment index re-bounded in January 2022 to its November last year level. According to a survey conducted by GKI Economic Research Co. with the support of the EU, business and consumer expectations also rose in the first month of the year, but while the former are lagging behind, the latter are much more positive than in November last year. However, compared to before the pandemic situation, business confidence is higher and consumer confi-dence is lower.

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You can reach the archive of survey summaries here.

The forecast of GKI Economic Research Co. for 2022

The trajectory of the Hungarian economy in 2021 was more favourable in terms of GDP growth than expected in the budget for 2021 amended at the beginning of summer. At the same time, equilibrium conditions turned out to be much worse than planned, with inflation and the general government cash deficit soaring, the forint weakening and the external balance turning into a significant deficit. A considerable part of the divergence can be attributed to the excessive use of demand stimulus policies, which can be linked to the elections. At the same time, the escalating conflict with the EU, which led to the withholding of transfers, as well as unfavourable developments in the global economy, such as the energy price hike and the related deterioration in the terms of trade, and global supply disruptions (e.g., chip shortages), also played an important role.

You can download the forecast from here.

The archive of earlier forecasts is available here.