March 11, 2020 / 6:45 AM / in 23 days

UPDATE 1-Hungary's economy could stagnate under worst-case virus scenario-finmin

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BUDAPEST, March 11 (Reuters) - Hungary’s economy could stagnate or even contract slightly this year under the worst-case scenario if the global impact from the coronavirus outbreak deepens and lasts a long time, Finance Minister Mihaly Varga said late on Tuesday.

“We reckon with scenarios between -0.3% and plus 3.7% (in terms of economic growth),” Varga told local Inforadio.

“It is always worth examining the worst case possibility as ... then we can only be surprised positively.”

He said if everything returned to normal in the global economy soon, then Hungary’s economy — which relies heavily on exports to the euro zone — could expand by 3.5% to 4% this year.

Varga also said that as a small silver lining, inflation was expected to ease as oil prices have plunged. This would also be positive for the trade balance.

Hungarian headline inflation came in at 4.7% in January and 4.4% year-on-year in February, driven by fuel, alcohol, tobacco and food prices.

“A very significant element in January inflation was that oil prices rose substantially in the past year,” Varga said.

“We can expect that the level of inflation will decline and will not bring along an increase in the level of interest rates which is important for managing state debt.”

Hungary will need to redraw its budgets for 2020 and 2021 and offer major assistance to economic sectors worst hit by the spread of the coronavirus, which threatens “brutal change,” Prime Minister Viktor Orban said on Tuesday.

Orban told business leaders that uncertainty and caution in the economy would run high in coming months, adding he expected a pandemic, and the tourist season this year would “go down the drain.”

Hungary has 13 confirmed cases of the coronavirus, according to the government’s official website.

Reporting by Krisztina Than Editing by Shri Navaratnam and Kim Coghill

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