BUDAPEST, (Reuters) – Hungarian business and consumer confidence declined in May following an increase in April. A survey conducted by GKI on Monday showed that households became more worried about their finances due to the rise in inflation.

Soaring energy costs, and war in Ukraine driving further price pressures, means that the National Bank of Hungary will have to confront the problem of persistent inflation fighting while also maintaining momentum within the Hungarian economic system.

NBH stated that the inflation rate, currently at 9.5% per year in April (its highest since June 2001), was likely to increase further over the next months. The average annual rise is between 9% and 10%.

GKI’s monthly survey Monday revealed that after April’s rise, business confidence declined by 5.5 points and consumer confidence plummeted by 9.5 points.

GKI stated that “Consumers’ inflation expectation strengthened again in May, after a weakness in April.”

“Since Ukraine-Russia War broke out, consumers and businesses have been extremely pessimistic about Hungarian economic prospects. And this optimism intensified in May.”

Although companies were more likely to plan price increases than they were in April, there was a slight decrease in the number of them. May saw customers become more cautious about saving and their finances.

NBH’s base rate has increased by 450bps to 5.4% since last June.

According to NBH, credit demand in Hungary is likely to slow down. This comes after an extremely strong first quarter.