Presenting the quarterly Inflation Report, he noted that the NBH has raised its inflation forecast to 11.0-12.6% for 2022, from 7.5-9.8% in the March report.

Hungarian inflation is the lowest in the region, thanks to price caps introduced on basic goods, which stop energy price hikes from raising customer prices, he said.

The government measures are expected to moderate inflation by 4.3 percentage points in 2022 and 0.7 of a percentage point in 2023, Baksay said, noting that the estimate was based on the technical assumption that the price caps would be phased out gradually between October 1, 2022 and June 30, 2023.

Food prices may increase by more than 20% in the coming months, while raw material and energy costs are close to peaking, he said. Producer prices are still rising so these are still passing through into consumer prices.

The NBH raised its GDP growth forecast in the fresh report to 4.5-5.5% in 2022 from its earlier projection of 2.5-4.5%. The NBH expects higher, consumption-driven growth this year.

The NBH expects the current account deficit to temporarily rise to 6% in 2022.

This year’s narrowing of the foreign trade deficit can be attributed to the deteriorating terms of trade, the slowdown in external markets and the import requirement of the strong domestic demand, it said.

The NBH expects the budget deficit to fall to 4.9% of GDP this year and 2.5% in 2024.

The public debt-to-GDP ratio could fall below 75% in 2022 from 76.6% at the end of last year, Baksay said.