Inflation could accelerate to around 20 percent in the coming months, said Barnabás Virág, vice president of Bank Magyar Nemzeti. According to the vice president, the risk of a global recession is very high. The world is moving towards a special storm zone, a supercell phenomenon is expected in Europe.
The press from Budapest points out that in July, compared to June, prices increased by more than two percentage points, which is considered high. The latest inflation data met expectations from the Hungarian National Bank (NBM), but core inflation of 16.7% was slightly higher than expected.
According to the central bank’s expectations, inflation is still rising, at least until autumn, but this process will continue until the end of the year, not only in Hungary, but also in Europe. “Here in Europe, it is still too early to talk about whether we are at the end of the inflationary upswing,” the central bank’s vice president told the InfoRádió Aréna program, noting that the inflation rate may start to fall. at the end of the year or at the beginning of next year.
Hungarians being a “key nation” in Europe are not limited to the national context
At the local level, however, when estimating the inflation rate, two new aspects that have appeared in recent months must be taken into account. In addition to the current increase in food and energy prices, the drought situation must be taken into account, which in the Central Eastern European region could trigger a new wave of price increases in the autumn for those products that have already risen in price to one of the largest stretches. The other effect is the increase in utility prices due to government measures. This will be reflected in September’s bills and give a further boost to inflation
Rising utility prices alone add 3 percent to inflation, according to central bank estimates. If this is just added as a rule of thumb to the most recent inflation expectation of 15-16%, then an inflation rate of 18-19% is already visible. And to this, according to Barnabás Virág, it will be necessary to add how much the price increase will be as a result of the drought, or what further changes will be induced by the change in raw material prices on global markets.
The iron curtain of inflation, says the banker from Budapest
By the way, the inflation rate is not at the same level in the countries of Europe, but is increasing towards the east. A “virtual iron curtain” is seen, inflation is 13-17 in Eastern Europe and over 20 in the Baltic countries, and in Western Europe, it is “only” 8-9 percent By autumn, there is a very serious of global recession. According to Barnabás Virág, the world is moving towards a special storm zone, where more serious phenomena can develop. Europe is particularly exposed to this – emphasized the vice-president of the MNB.
As he listed, in the 1970s there was stagflation, an energy crisis, then stock market crises, emerging market problems in the 1990s, the global economic crisis in 2008-2009, then the debt crisis and the coronavirus epidemic in 2020-21.
“Now, however, all the phenomena that characterized these crises are here with us. The level of debt is high in the world, there is also the coronavirus, which also means shutdowns in China, energy prices are rising… There is such an atmosphere where these factors can come together very easily. Europe is more exposed to them than the United States or China,” Barnabás Virág described the global economic situation.