NBH highlights ‘strong’ influence of war on Hungarian economic activity
The National Bank of Hungary (NBH) acknowledged the country’s “dynamic” economic growth at the start of the year, following record expansion in 2021, but said economic activity in the coming quarters will be “heavily influenced” by the war in Ukraine in its quarterly report. Inflation report released Thursday.
“In the coming quarters, economic activity will be strongly influenced by the war, the sanctions policy put in place and the responses of governments to this extraordinary situation,” the central bank said in the report.
“The repercussions of war have their strongest restraining effect on economic growth directly through trade channels and disruption of international production chains.
In addition, rising commodity prices and business costs, as well as the generally high level of uncertainty are also holding back growth,” he added.
The NBH lowered its GDP growth forecast for 2022 to 2.5-4.5% in the new report, from 4.0-5.0% in the previous one published in December.
Presenting the report at a press conference, NBH director András Balatoni said that the macroeconomic impact of the war as well as the sanctions against Russia would reduce Hungary’s exports while trade with Russia and Ukraine falls, growth slows in external markets and supply chain disruptions weigh.
Rising energy prices and inflation will increase uncertainty, leading to a deceleration in lending and lower investment, while a slowdown in wages and transfers, adjusted for inflation, will lead to lower consumption, he added.
While the BNH acknowledged a “high degree of uncertainty” surrounding Hungary’s short-term economic outlook, it said the country’s economy “continues to have strong capacity for growth”.