Inflation sensitive to global economic shocks: Hungary's Finance Minister

Inflation shocks: Hungary's Finance Minister on Saturday warned against complacency despite a sharp fall in the European Union's highest inflation rate, saying any new supply shock to the global economy could reignite price growth.

The comments by Finance Minister Mihaly Varga underscored a policy rift within Prime Minister Viktor Orban's government, with the Varga calling for looser fiscal rules and a higher inflation target to drag the economy out of recession.

Hungary's inflation, which scaled the European Union's (EU's) highest levels at 25 per cent a year ago, eased to an annual rate of 5.5 per cent in December, data showed last week.

The Minister reiterated that the government estimates that prices will rise 5.2 per cent in 2024 in Hungary.

"This level cannot yet be called low, and it has its dangers," Varga told economic daily Vilaggazdasag.

"From this level any small global economic or other imbalance could push Hungarian inflation to an uncomfortable level."

The surge in inflation pushed the economy into recession, forcing Orban's government to cut its 2024 growth forecast to 3.6 per cent at the end of last year.

However, Varga also cautioned against government overspending.

Further, he emphasized the need to keep the budget deficit low and to further cut government debt while working towards sustainable growth.

(With Reuters Inputs)