August’s 3.4pc CPI was in line with the National Bank of Hungary’s expectations, and the central bank sees inflation falling to 3.1pc in September, Andras Balatoni, an NBH director, said on Thursday.
Presenting the NBH’s fresh quarterly Inflation Report, Balatoni said CPI would rise moderately for the rest of the year, edging over 4.0pc in December.
The NBH puts 2024 average annual inflation at 3.5pc-3.9pc in the fresh report, compared to 3.0pc-4.5pc in the one published in June.
Balatoni said disinflation would continue in the first quarter of 2025, supported by a lower external cost environment and lower retrospective repricing. The effect of retrospective pricing of services will wind down, while core inflation could start to fall in the second half of the year, bringing CPI back to the central bank’s 3.0pc +/-1pp tolerance band in a sustainable manner, he added.
The NBH estimates that the financial transactions duty will lift average annual inflation by 0.1pp in 2024 and 0.2pp-0.3pp in 2025, he said.
The NBH knocked down its forecast for 2024 GDP growth to 1.0pc-1.8pc from 2.0pc-3.0pc, as low order stock in the industrial sector and drought in the farming sector weigh. On the consumption side, household consumption and net exports are seen supporting growth, while investments weigh.
The re-launch of earlier postponed investments and improved external demand could result in more balanced growth in 2025, lifting GDP growth to 2.7-3.7pc. GDP growth could reach 3.5-4.5pc in 2026.
Balatoni noted that employment was at a historic high, but labour market tightness was easing as businesses tapped unused capacity and drew on labour market reserves.
The NBH reduced its forecast for this year’s general government deficit to 3.5pc-4.5pc of GDP, from 4.5pc-5.0pc, on spending cuts announced in the summer. It sees a 0.3pp decline in the year-end state debt level.
