The worst might be behind Hungary. Yes, the economy is still in a technical recession, but we see a way out from it by the second half of 2023. A key source of the recovery lies in the growing disinflation process.
The collapse of the domestic demand erases the repricing power of companies. Thus, we see a single-digit headline inflation by the year-end and further normalisation in 2024. This means a positive real wage growth yet again from late-2023.
However, with depleted household savings and tighter fiscal headroom, we hardly see a boom in domestic demand.
The recovery will be export driven, thus we see a quick return to surplus in the current account balance. Improving external financing needs and the new era of monetary policy (eg, persistent positive real interest rates from late-2023) lead us to be constructive towards Hungarian assets.
