CEE ECONOMY-Hungary is latest central Europe economy to slip into technical recession

They expect price growth to slow quickly this year, with weaker growth helping disinflation. In Poland, the economy fell on a quarterly basis for the second time in 2022, although it has avoided consecutive declines so far.

Hungary slipped into technical recession in the fourth quarter, the latest central European economy to shrink due to the high inflation hitting growth around the region. The European Union's emerging east has been fighting recession risks posed by soaring energy and food prices which are crushing purchasing power and causing consumers to cut back. Firms are also facing higher costs and struggling to achieve order growth.

The Czech economy became the first in central Europe to fall into a mild recession in the second half of 2022, preliminary data last month showed. On Tuesday, Hungary followed suit, and Poland's economy tumbled by 2.4% quarter-on-year. Other data releases around the region showed some countries ending 2022 stronger than expected as slowdowns loomed.

In Hungary, gross domestic product (GDP) dropped 0.4% quarter-on-quarter, following a 0.7% decline in the third quarter. On a year-on-year basis, the economy grew by 0.4%, a sharp slowdown from 4.0% growth in the third quarter. "The Hungarian economy fell into a technical recession," ING economist Peter Virovacz said. "For now we see a realistic chance that GDP will contract on quarterly terms in the first quarter of 2023 and then recovery can begin towards pre-crisis GDP levels."

Hungary still posted one of the fastest full-year growth rates in central Europe, at 4.6% in 2022. Hungary's Finance Minister Mihaly Varga said in a statement the economy shrinking was "a moderate and temporary slowdown and growth can continue this year."

Some analysts also saw the outlook for recovery brighter, with external factors like easing energy prices helping. Separate data from the central bank on Tuesday showed Hungary's current account deficit narrowed to 694 million euros in December from 1.699 billion euros in November.

That data followed comments on Monday from central bank deputy governor Barnabas Virag, who said improvement in the balance of payments was an internal factor to be watched when the bank weighs changing its 18% one-day deposit rate. HOLDING UP

Monetary policymakers around central Europe sharply raised interest rates in tightening cycles starting in 2021 - before major central banks began battling inflation - but have shifted to stable policy to cushion slowing economies. They expect price growth to slow quickly this year, with weaker growth helping disinflation.

In Poland, the economy fell on a quarterly basis for the second time in 2022, although it has avoided consecutive declines so far. Year-on-year growth slowed to 2.0%. Slovakia posted quarterly growth of 0.3%, while expansion eased to 1.1% year-on-year, beating a forecast of 0.9% growth.

Bulgaria, too, grew by half a percent on the quarter and 2.1% year-on-year, while the Romanian economy advanced 1.1% in seasonally adjusted terms in the final quarter of 2022, roughly keeping pace with growth posted in the third quarter. Romania's central bank has warned of a slowdown in early 2023, with war in neighbouring Ukraine following Russia's invasion weighing.

"For 2023, we expect the economy to pump the brakes and the full-year GDP growth to decelerate to +2.1%," Erste Group Bank said, adding Romania might avoid a technical recession.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)