WOOD Flash – Hungary macro: a deep downturn in the making for next year

The latest data releases confirm to us that Hungary is on course for a recession that will be deeper than its peers, but will entail less pronounced risk for the HUF. The economy should contract by 1.7% next year, before rebounding by +1.4%; while inflation will not return to the MNB’s 3% target at least until the end of 2024E. Progress is continuing on the legislative steps that were demanded by the EU, and we stand by our view, presented in October, that the conditionality mechanism is likely to be closed sometime before the year-end. Although not all of the issues have been resolved, we believe that the remedial measures implemented by the government are reaching critical mass, which should help Hungary avoid entering a vicious spiral of suspended EU funds/potential loss of investment grade status and, de facto, severe political uncertainty.