The European Commission forecasts a 7% slump in Hungary’s economy this year followed by a 6% rebound in 2021.The novel coronavirus pandemic hit Hungary after years of above-average growth, the EC’s spring report released on Wednesday notes. Although the virus has spread only to a limited extent in Hungary, this year’s economic performance would depend on domestic economic policy decisions, the EC said.
The pandemic hit hardest the tourism and transport sectors, which make up half of the services sector in the country. The international recession may badly impact the Hungarian processing industry, despite relatively mild restrictions in the industrial sector, it added.
Investments are expected to fall by 18.7% before rebounding by 8.9% in 2021. Inflation is set to decline to 3.0% from last year’s rate of 3.4%. The budget deficit is seen jumping to 5.2% of GDP from 2.0% last year due to a fall in tax revenues. The EC put the deficit at 4.0% for 2021. The public debt-to-GDP ratio is expected to rise to 75.0% before declining to 73.5% next year.
Hungary’s government projects a GDP fall of 3% this year. But it is also prepared for a sharper drop if the pandemic drags on into the third or fourth quarters.