Hungary

This report does not constitute a rating action. Overview Institutional and economic profile Flexibility and performance profile Hungary?s real GDP already exceeds pre-pandemic levels Fiscal and monetary authorities are rolling back policy support --S&P Global Ratings expects Hungary?s economy will expand by over 5% in real terms in 2022. --The government has already started to curb spending after elevated fiscal deficits in 2020 and 2021. --Over the coming years, consumption, backed by rising disposable income, and investment, funded by high EU fund inflows estimated at over 4% of GDP annually, will spur growth. --High inflation, at 7.4%, has compelled the Hungarian National Bank (MNB) to hike its main policy rate by a cumulative 2.3% since June 2021 and withdraw most

...Hungary's 2021 economic recovery, estimated at close to 7% in real terms, was one of the strongest in the EU and we expect real growth rates will exceed 3.5% on average through 2025. Buoyant domestic demand outweighed the drag from supply side bottlenecks on Hungary's industrial sector in second-half 2021, resulting in a swift economic recovery. We believe rising disposable income will contribute to real growth exceeding 5% in 2022. In our view, EU fund inflows of over 4% of GDP annually will underpin real growth rates of over 3% on average after 2022. Monetary and fiscal authorities have started tightening after Hungary's economic recovery and an inflation surge. The recently announced fiscal savings measures will likely reduce the deficit to about 5% of GDP in 2022--following two years of extraordinarily high deficits of over 7.5% of GDP on the back of generous stimulus measures. Likewise, the MNB has almost fully withdrawn its extraordinary policy support measures and started raising...

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