The on-going recovery is projected to continue, though at an uneven pace owing to deleveraging and supply-side impediments. While further cuts in administered energy prices will moderate headline inflation for a few quarters, inflation expectations are still above target, although they are declining, and cost pressures will tend to raise price pressures afterwards. Robust export growth throughout will lead to a rising current account surplus.
The authorities should remain committed to fiscal discipline. Prudent monetary policy is essential to stabilise expectations and, in view of declining but still high foreign currency indebtedness, avoid a potentially disruptive depreciation of the forint. Halting the persistent contraction in loans and fostering capital reallocation to more efficient uses requires tackling supply-side credit constraints by allowing better bank profitability and by cleaning up bank balance sheets.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.