Hungary’s GDP growth forecast has been raised this year to 7.4% by the European Commission, from a previous 6.3% forecast published in July.

Last week, Hungary’s Finance Ministry also reduced its GDP growth projection this year to 6.8% from 7-7.5% due to elevated energy prices, inflationary pressures and the effect of the fourth wave of the pandemic.

Moreover, the EC increased its forecast for the country’s GDP growth in 2022 to 5.4% from 5%, reports the Budapest Business Journal.

The EC recognised "robust" growth in Q2 2021, but added global supply chain disruptions are set to "dampen" growth in the second half.

In addition, GDP growth next year will be reinforced by ongoing fiscal stimulus, then is predicted to decelerate to 3.2% in 2023 "as output returns close to its potential and policy support is gradually withdrawn" the Commission added.

Household consumption in Hungary is forecast to take advantage of "robust income gains, government support measures and buoyant consumer confidence,” the EC said.

The Commission forecasts investment growth to hit 7.6% this year and 8.4% in 2022. It said investment is set to "remain buoyant" on an improving economic outlook and "significant policy support" via grants and favourable financing conditions. Moreover, public investment is also expected to "grow markedly" in 2021-22.

Consumer price inflation will hit a high in Q4 2021 at 6.7%, as per the forecast, bolstered by the economy reopening and global hikes in goods and commodity prices. The Commission added that regulated retail energy prices would in part protect households from the higher commodities prices. average annual CPI stands at 5.1% in 2021 and 4.8% in 2022.

Furthermore, the EC forecasts the general government deficit, relative to GDP, will drop from 7.5% this year to 5.7% in 2022 and 3.8% in 2023.