IMF Staff Country Reports

The 2022 Article IV Consultation with Hungary highlights that while the economy was recovering from the coronavirus disease-crisis, a succession of shocks and loose fiscal policy intensified inflation and fueled a large external deficit. Appropriately, the central bank significantly tightened monetary policy and the government plans a large fiscal adjustment. However, regulatory measures undermine the tighter fiscal and monetary policy mix. Growth is expected to slow sharply with still-elevated inflation and sizable risks can worsen the outlook. Consistent overall policy tightening is needed to address imbalances amid large uncertainty. Shocks that significantly weaken growth and inflation may prompt a more gradual tightening, while shocks that intensify inflation would require a faster tightening. Strengthening energy security will help meet climate objectives and reduce vulnerabilities to supply shocks. Strengthening governance is needed to improve the business environment and the efficiency of spending.