According to the European Commission’s winter interim economic forecast, Hungary’s gross domestic product (GDP) fell by 5.3 percent in 2020, while the November forecast had estimated a 6.3 percent decline.
According to the panel’s analysis released on Thursday, construction and retail sales remained strong in October and November 2021. However, due to the second wave of the epidemic, GDP contracted somewhat in the fourth quarter of last year, mainly due to a drop in investments and services exports.
The commission’s analysis projects GDP growth of 4 percent this year, a figure unchanged from forecasts last November. However, for 2022, the board predicts a 5 percent expansion, which is 0.5 percentage points more than the autumn forecast.
The report pointed out that the unemployment rate was 4.3 percent in December 2020, almost unchanged from previous months.
The government has provided some employment protection support in sectors most affected by COVID-19, but job creation is not expected to resume until economic growth returns. According to the report, more moderate labor market demand will also moderate wage growth. Restrictions reintroduced due to the second wave of the epidemic may also again reduce the consumption of the Hungarian population.
Inflation eased in the last months of 2020, as food and fuel prices fell. The harmonized index of consumer prices, HICP inflation, was 3.4 percent in 2020 and is projected to remain at 3.5 percent in 2021 due to the previous weakening of the forint and the increase in excise duties on tobacco products. Ignoring these temporary factors, inflation is expected to fall to 2.9 percent.