Hungary Foreign Direct Investment (EUR bn)

Foreign Direct Investment in Hungary

Activity seemingly continued to shrink in Q1, following two periods of quarter-on-quarter contraction. Industrial production fell, on average, in month-on-month terms in January-February, and retail sales shrank sequentially for the third month in a row in February. On top of this, the unemployment rate rose in January-February, while inflation averaged higher than in Q4 in Q1. On the other hand, business and consumer sentiment strengthened, although both remained entrenched in deeply pessimistic terrain. The economy likely remains in the doldrums in the second quarter. Both business and consumer sentiment lost ground in April, pointing to weakening dynamics. Meanwhile, the European Central Bank criticized a government decree restricting the transfer of central bank discount bills and capping large commercial bank deposits until end-H1, stating that it weakens the MNB’s independence.