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Hungarian economy expected to grow again in 2021

The Hungarian economy may expand by 4 percent in 2021 after last year's decline of 6 percent.

According to Lajos Török, head of Equilor Investment, the government debt-to-GDP ratio may decrease minimally this year to 79.5 percent and then return to a slow downward trend. Due to the government’s supportive fiscal policies, the budget deficit may reach 4 percent of GDP this year after 9 percent last year, and then return to 3 percent in 2022 at the earliest. However, it could take at least 5-8 years to work off the extra debt accumulated in the wake of last year’s crisis.

According to Equilor, intensive growth will begin in the domestic economy in the second half of 2021, helped by supportive economic and monetary policies. Employment has been better than previously expected; however, if the restrictions are prolonged, some SMEs may become underfunded, increasing unemployment yet again.

The greatest uncertainty around the world is due to the COVID-19 vaccine. Nobody knows exactly when Hungary will reach the 60-70 percent vaccination rate, and this may be achieved in the EU only in the third quarter of the year because of the slow arrival of vaccine doses. Meanwhile, in the United States and several other countries, this rate might be reached as early as the second quarter.

The  Equilor analysis highlighted other factors affecting the world economy, such as the Brexit agreement being reached and the European Union adopting its next budget. Török additionally spoke about the victory of Joe Biden in the United States, a less divisive, centrist politician who will take power over the world’s largest economy.

Equilor said central banks could also continue their liquidity-providing programs again this year, keeping interest rates at historically low levels while monitoring inflation, indicating that a low-yield environment could remain for years to come.

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