Based on data from 2022 and H1 2023, analysts expect yearly inflation in Hungary to be reduced below 10% by December. Even in the worst case scenario, the yearly average inflation in 2023 will not be higher than 19%.
Slow but steady disinflation since the start of the year
Yearly inflation in Hungary was at 25.7% back in January 2023. Since then it has decreased by more than 5.5 percentage points, and the trend seems to accelerate. Monthly inflation was at 0.7%, but in fact this is the result of the gradual easing of inflationary pressure over the first six months of the year. Based on the data from June, the speed of price increases is decelerating, which means there is every chance that by December, yearly inflation will arrive under 10%.
Expectations for the rest of 2023
Reaching a single digit inflation by the end of the year is in line both with the objectives of the Hungarian government and the predictions of prominent analysts who have examined several possible scenarios.
- If monthly inflation remains at 0.7%, yearly inflation is expected at 9.3% in December, which means an average yearly inflation of 18.4% in 2023.
- In a somewhat more optimistic scenario, with a monthly increase of only 0.5%, yearly inflation might be as low as 7.7% in December, which means an average yearly inflation of 17.9% in 2023.
- In a somewhat more pessimistic scenario, with a monthly increase as high as 0.9%, inflation in December will still be only 10%, with an average yearly inflation of 18.6% in 2023.
In either case, yearly inflation will be reduced to at most 10% by the end of the year, while the yearly average inflation will not be higher than 19%, even in the worst case scenario.
Aspects to consider
Last year Hungary also experienced a price shock due to the sudden increase of energy prices, which became visible in grocery prices too. By 2023, the new setup has become established, and another similar steep price increase is not expected in H2.
Inflation is also decreasing both is the U.S. and in the euro zone, which is most relevant for the prices of goods imported to Hungary.
The results of the tight monetary policy in Hungary are showing, while the demand for loans is reducing due to the increasing interest rates on property loans. However, the effect of this is appearing in the economy with a shift. At the same time, the yields of government bonds tied to the inflation will be above 2023 yields in 2024. However, pension supplements will become necessary by the end of the year, since yearly average inflation is expected above the 15% increase to pensions earlier this year.
Forecast for 2024
While the current gradual decrease of inflation is encouraging, the current trends are still far from the yearly inflation rates of the years before the pandemic, which were typically around 3%. If all goes well, analysts expect yearly inflation in Hungary to be around 5.3% in December 2024, with the yearly average inflation around 5.8%.
Prepare for the future with an excellent accountant
While inflation is decreasing slowly but steadily in Hungary, your business needs an accurate accountant who can help you keep tab on the finances of your Hungarian company and made informed business decisions based on up-to-date data. Helpers Finance is just like that – we focus on working with foreign owners of small and medium-sized companies, and we have extensive experience in keeping your books in order as well as keeping you informed.
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