Gross capital formation showed the biggest drop on a quarterly basis, while exports also decreased.
"The declining purchasing power of households has not really hit the economy so far, as opposed to high interest rates and delayed or scrapped investments," ING economist Peter Virovacz said.
"We expect high inflation to exert the strongest drag on the
economy in the first quarter of 2023, meaning that the technical
recession in the Hungarian economy can last three quarters."
Hungary's central bank left interest rates, including its
base rate at 13%, unchanged on Tuesday, defying government
pressure to cut borrowing costs as the economy slows.
Economic Development Minister Marton Nagy, a former central
bank deputy governor and Prime Minister Viktor Orban's top
economic aide, called current rate levels "extremely onerous"
for the economy.
The bank has warned the disinflation process would be slow.
Economists, though, have forecast there was room to cut the
base rate by up to 250 basis points by the end of the year.
(Reporting by Jason Hovet in Prague and Gergely Szakacs in
Budapest; Editing by Jan Harvey)
