Hungary: Severe recession

Real GDP growth fell sharply in the fourth quarter of 2008 as the recession in the euro area curbed exports, adding to already weak domestic demand which reflected fiscal restraint and tight credit conditions. The economy will be in deep recession in 2009 before slowly picking up in 2010.

Unemployment is likely to reach double-digit figures during the projection period. After slowing at the beginning of 2009, consumer price inflation is projected to rise during the year due to value-added tax and excise tax increases and the recent currency depreciation.

Implementing sustainable fiscal consolidation is the key for boosting investor confidence and providing room for monetary policy to ease. Given the projected severe recession, maintaining deficit objectives through further cuts would amplify the cycle. To foster credibility of fiscal consolidation policymakers should thus adhere to nominal expenditure targets, while strengthening the medium-term expenditure framework. This, together with the shift from direct to indirect taxation, should raise Hungary's growth potential.

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©OECD Observer No 274, July 2009

Economic data

GDP growth: -1.8% Q1 2020/Q4 2019
Consumer price inflation: 0.9% Apr 2020 annual
Trade (G20): -4.3% exp, -3.9% imp, Q1 2020/Q4 2019
Unemployment: 8.4% Apr 2020
Last update: 9 July 2020

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