June 9, 2020 / 7:59 AM / a month ago

UPDATE 2-Hungarian economy can recovery strongly from Q3 -Virag

* Hungarian economy can show modest growth in 2020 -Virag

* May data show gradual slowdown in price growth

* Does not reiterate cbank’s March GDP forecast

* Analysts forecast economy will shrink 4.6% in 2020 (Adds more comments, detail)

By Gergely Szakacs

BUDAPEST, June 9 (Reuters) - Hungary’s economy can recover strongly from the aftermath of the coronavirus pandemic from the third quarter, central bank Deputy Governor nominee Barnabas Virag told a parliamentary confirmation hearing on Tuesday.

Virag, the Hungarian central bank’s managing director in charge of monetary policy and economic analysis, added that tackling the economic fallout of the pandemic could however take years and inflation would be volatile in the period ahead.

Deputy Governor Marton Nagy unexpectedly resigned last month, raising questions about the future direction of the bank’s monetary policy.

“The economic policy of the next years will be defined by handling the consequences of the coronavirus pandemic and this will not mean winning several quarters but the need to manage the next years appropriately,” Virag said.

Hungarian industrial output plunged by 36.8% in April as the coronavirus pandemic sent the economy into free fall, with car factories virtually halting production.

Analysts polled by Reuters expect the Hungarian economy to shrink by 4.6% this year. The central bank had forecast 2% to 3% economic growth in its March inflation report.

The next policy meeting is on June 23, when the Monetary Council will discuss the key economic forecasts of the bank’s quarterly inflation report.

Virag did not reiterate the March forecast in response to questions from lawmakers, saying only that the economic outlook was very uncertain.

“We are in an extraordinary situation, where the assessment of the outlook is highly uncertain,” Virag said.

He said Hungary could show modest growth in 2020 provided that private and public sector investment projects already in the pipeline are launched in the second half of the year.

The nomination of Virag, who joined the NBH in 2003, will ensure policy continuity at the bank, which has supported Prime Minister Viktor Orban’s pro-growth agenda with low interest rates and unconventional measures, analysts have said. (Reporting by Gergely Szakacs; Editing by Kirsten Donovan)

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