OECD improves growth forecast for Hungarian economy

The Organization for Economic Co-operation and Development (OECD) raised Hungary forecast economic growth for this year at 6.0% from 4% in its previous report in June, but lowered its forecast for 2023 to 1.5% from 2.5% in its latest economic forecast released on Tuesday .

The slowdown in growth in 2023 is explained by the economic fallout from the Russian-Ukrainian war, subdued external demand and slower household consumption growth due to lower real wages.

The OECD has also revised down its inflation forecasts for 2022 and 2023, from 10.3 and 7% in June, to 13.5 and 12.7% respectively.

The unemployment rate could be lower this year at 3.5%, down from the summer forecast of 3.8%,

but revised data suggests it could reach 4.7% next year, a full percentage point higher than in the previous report.

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In its June forecast, the OECD predicted that the budget deficit-to-GDP ratio could rise from 5.5% to 5.4% in 2022, from 2022 to 2023, while Tuesday’s forecast now calls for deficits of 6, 2% and 5.6%, respectively. The current account deficit could narrow from 5.6% of GDP this year to 4.6% next year, 0.6 and 1.2 percentage points more than the June forecast.

Hungary’s economy is weathering the adverse effects of war and sanctions, growing 4.1% in the third quarter and 6.1% in the first nine months of the year, above expectations ,

Mihály Varga, Hungarian Minister of Finance announcement last week in a video message posted on his Facebook page.

It should also be mentioned that the Hungarian tax system has received prestigious international recognition, as Hungary moved up to seventh place in EY’s tax competitiveness ranking, the minister said earlier. Hungary had also overtaken countries like Germany, Austria and the United States of America in the ranking of the international tax consultancy.

In their report, they pointed out that Hungary has the lowest corporate tax rate among Organization for Economic Co-operation and Development (OECD) countries, and that the flat personal income tax 15% was also considered an asset, the Minister added.

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Featured photo via Pexels

Laura T. Thrasher