Hungary Foreign Direct Investment (EUR bn)

The economy contracted again in quarter-on-quarter terms in Q4 2022. Weaker domestic demand buffeted by soaring inflation, higher interest rates and depressed consumer and business sentiment was behind the reading. The economic picture seems largely unchanged in the first stretch of this year. Business and consumer sentiment remained considerably downbeat in January and February, pointing to weak spending and investment. Moreover, inflation soared in January, eating further into consumers’ pockets. That said, declining gas prices should give some breathing room to the economy in the quarter. Meanwhile, in late February, Scope downgraded Hungary’s credit rating to BBB from BBB+, with a stable outlook. The rating agency mentioned a worsening economic outlook, strong inflationary pressures and reduced policy predictability as the main drivers.