The National Bank of Hungary (NBH) forecasts Hungary’s GDP to inch down 0.2pc in 2010 and it puts average annual inflation for the year at 4.4pc, the bank said on Monday, citing the main figures of its fresh quarterly inflation report to be published in full on Wednesday.
The NBH raised its 2010 average inflation projection compared to 3.9pc in its November report, and now expects inflation to drop below the 3pc midterm target only in Q1 next year instead of Q3 this year as forecast in the previous report.
The new NBH inflation forecast is above the 4.1pc annual average inflation projected by the government in the latest update of Hungary’s convergence report sent to Brussels in January.
The NBH improved its GDP projection from a 0.6pc decline foreseen in November. The projected 0.2pc contraction is in line with the govermment’s recently updated 2010 projection.
The forecasts for 2010 in the November inflation report were the same as the government’s forecasts at the time.
Inflation is mainly boosted by non-core factors, NBH president Andras Simor told reporters, noting that they raised their forecast for 2010 core inflation only slightly, to 3.2pc from 3pc in the November report. The annual core inflation forecast for 2011 stayed unchanged at 1.3pc, he said.
Mr Simor listed three factors which point towards higher inflation. One was the fact that, due to the recession the CPI basket was amended far wider than usual at the start of the year, the second was the sharp rise in forint-term oil prices, and a sharper than expected rise in regulated prices.
The global economic pickup is expected to boost food, raw material and energy prices, and the bank expects regulated prices to rise at a rate above market prices.
Even with these factors, inflation is projected to stay significantly below the 3pc target over the 1.5-2-year horizon relevant for the monetary policy, Mr Simor said, as low domestic demand and unemployment limit inflationary pressures.
The NBH projects net exports to contribute exports more and expects even more subdued domestic demand than previously, he said. They do not expect any significant pickup of domestic demand and any significant improvement in unemployment before 2011.
As for 2011, the new inflation report projects GDP growth of 3.4pc, as did the November report, and forecasts average annual inflation of 2.3pc, revising the respective 1.9pc upward.
The Bank’s 2011 GDP growth forecast is lower than the 3.7pc growth foreseen in the convergence plan update while next year’s inflation forecast is the same as the government’s.
In 2009, GDP fell by 6.3pc according to preliminary Central Statistical Office figures, contracting less than the 6.7pc decline forecast in the previous inflation Report. Annual inflation, at 4.2pc came in at forecast. The forecasts in the November report for 2009 were in line with the government’s projections.