Wartime inflation continues to have a negative effect on the sense of prosperity
According to the August 2022 survey of Századvég Konjunktúrakutató, the sense of prosperity of both the population and businesses has declined: on a scale between -100 and +100, the value of prosperity index decreased from -16.8 to -26,6 regarding households, while it decreased from -19.0 to -23,4 regarding businesses. The decline in the indicators is still caused by the higher inflation environment induced by the Russian-Ukrainian war and the uncertainty induced by the economic sanctions, and by the higher volatility in the financial and primarily in the commodity markets. The sense of prosperity is possible to improve when the war ends, the uncertainty in the energy markets is eliminated, and lower prices develop.
The European Central Bank tightened its monetary conditions in July
In July 2022, inflation risks continued to rise both globally and in Central and Eastern Europe. This is mainly caused by a sharp rise in energy prices, more expansionary economic policies during the coronavirus crisis, disrupted supply chains and, crucially, the consequences of the increasingly protracted Russo-Ukrainian war.
The sense of prosperity is still affected by the war
According to the June 2022 survey of Századvég Konjunktúrakutató, the sense of prosperity of both the population and businesses has declined: on a scale between -100 and +100, the value of prosperity index decreased from -14.7 to -16.8 regarding households, while it decreased from -14.0 to -19.0 regarding businesses. The decline in the indicators is still caused by the uncertainty induced by the Russian-Ukrainian war and economic sanctions and by the higher volatility in the markets (foreign exchange, money, bond and commodity markets). The sense of prosperity is possible to improve when the war ends, the uncertainty in the energy markets is eliminated, and lower prices develop.
The latest proposal of the European Commission would institutionalise appropriation
The failed sanction policy has put Europe in a difficult situation, and the countries of our continent have to face an energy crisis in addition to wartime inflation. Brussels’ latest draft, which it intends to adopt at the extraordinary Energy Council to be held on 26 July, would further worsen the situation of EU citizens, and it would mean an open intervention in the lives of individuals and an unprecedented restriction on national sovereignty at the EU level. After imposing counterproductive sanctions, the European Commission would now go against its own primary sources of law, the founding treaties, which define subsidiarity as a basic principle and the order of EU legislation – these would be disregarded by Brussels.
Economic growth could be above 5% this year
Consumption growth will be a major growth driver in both years, helped this year by above-inflation wage growth and government transfers. A prolonged Russo-Ukrainian war and the possible further extension of sanctions associated with it, however, pose a significant risk to growth next year in particular. The persistence or possible worsening of energy market anomalies, a weak forint exchange rate (HUF/EUR) and high inflation also pose risks.