According to official data released on Tuesday, Hungary’s economy will enter a recession in 2022, as rising energy prices drive inflation higher.
Hungarian GDP fell by 0.4% in the final three months of 2022, following a 0.7% drop in the third quarter, according to the national statistics office KSH.
The last technical recession in Hungary, defined as at least two consecutive quarters of contraction, occurred in 2020, when the country was hit by the Covid-19 pandemic.
Hungary is reeling from soaring inflation, which reached an EU-high of nearly 26 percent in January, the highest in the central European country since the mid-1990s.
Prime Minister Viktor Orban has blamed EU sanctions against Russia for the sky-high inflation, which saw energy and food prices rise by 52% and 44%, respectively, in January.
Experts, however, point to the distorting effect of government price caps on food and fuel, as well as fiscal austerity measures such as cuts to household energy bill subsidies.
“As both households and corporations were forced to deal with crippling energy prices, domestic economic activity markedly slowed,” according to an ING Bank analyst bulletin.
According to the Hungarian MTI news agency, Economy Minister Mihaly Varga stated on Tuesday that the recession is “a slight and temporary decrease” and that growth will resume soon in 2023.
Economic activity increased by 4.6 percent in 2022, compared to 7.1 percent in 2021.
“Despite a protracted war (in Ukraine) and sanctions, Hungary was able to post annual growth in 2022,” Varga said, adding that unemployment remained low at around 4%.