Based on the German methodology, Hungary will lose billions in the coming months
This year, Hungary will lose HUF 3,674 billion due to the war and sanctions, i.e. the GDP volume would be that much higher without them. The Macronomic Institute quantified the effects based on the methodology developed by the German IW Economic Research Institute from the point of view of Germany, and the analysis also highlights that government programs (such as the energy-intensive SME support program, the factory rescue program, the renewed Széchenyi Card program and the Gábor Baross reindustrialization loan program) can contribute 0.5 percentage points in 2022 and 1.5 percentage points in 2023 to the expected increase in GDP – without them, the economic output would have increased by only 4.0 in 2022, and stagnation would occur this year.
Based on Makronóm’s analysis, the war and sanctions negatively influence economic performance in several ways: higher raw material and energy prices, higher government spending and the postponement of related investments, better external demand. Hungary is primarily affected by the sanctions through energy, since we do not have at our disposal an amount of extractable natural gas or crude oil that can satisfy domestic domestic procurement. A further disadvantage is that, in the absence of a sea port, the diversification of supply runs into difficulties, which means that the Hungarian economy is forced to rely on pipeline transport, which has no alternative in the short term.
The consequence of this is that Hungary is vulnerable to world market processes, the rising energy prices must also be paid for by domestic consumers and must be included in the prices
says the study.
However, the effects of war and sanctions do not only adversely affect our country: Hungary is an open economy, so the economic performance of our foreign trade partners greatly affects domestic GDP through export demand. Within this, Germany is particularly important, where 25.2 percent of our product exports flowed in the first ten months of 2022.
The numbers don’t lie: the European Union punched a 1,600 billion hole in the Hungarian budget72.4 percent of the cash flow deficit is due to interest charges on the national debt, as well as lack of EU funds gave last year. The weight of the two items in 2021 was only 41.2 percent. |
The impact on the German economy was quantified by the German Institute for Economic Research IW. For this, economic forecasts prior to the war conflict and sanctions were used as a baseline, which gives an idea of the growth path the economy would have been on if none of the above events had occurred. They compared this with the current forecasts, based on which they came to the conclusion that
The war in Ukraine and the sanctions will cause Germany a loss of 175 billion euros in 2023, which is equivalent to 4.5 percent of GDP, and represents 2,000 euros per capita.
In connection with the price increase, the experts drew attention to the fact that accelerated as a consequence of the war and sanctions: while in May 2021 a price change of 3.8 percent for last year and 3.7 percent for this year was assumed in the Hungarian economy, by that time the January 2023 signal predicts 15.7 and 14.9.