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GDP flat in Q4, contracts by 0.9 percent in 2023

Hungary's GDP stagnated in the fourth quarter and contracted by 0.9 percent for the full year, the Central Statistical Office (KSH) said in a first reading of data on Wednesday. Adjusted for calendar year effects, GDP rose by an annual 0.4 percent in Q4. For the full year, adjusted GDP dropped by 0.8 percent.

KSH said the performance of the economy rose mainly in the farm, health-care, social services and ICT sectors. That growth was countered by declines in the industrial and construction sectors, and part of market services, mainly trade, it added.

Quarter on quarter, GDP was flat, adjusted for seasonal and calendar year effects.

Commenting on the fresh data, Economy Minister Marton Nagy attributed stalled growth mainly to weak external demand, noting the recession in Germany and stagnation across the European Union. He added that “extraordinarily high” real interest rates had also negatively impacted GDP by giving businesses an incentive to save rather than make investments.

Sustainable and speedy economic growth cannot be achieved without a healthy credit market, he said.

Nagy said signs of improvement in the economy were already visible, noting data indicating a pickup in retail sales and tourism in recent months. State-subsidised lending schemes and a voluntary programme among commercial banks to offer businesses favourable lending rates could accelerate the recovery on the credit market, he added.

Achieving GDP growth of 4 percent in 2024 is a “priority” goal for the government, the minister said.

In a video message posted on social media after the release of the data, Finance Minister Mihaly Varga said Hungary’s GDP growth could reach 3 to 4 percent in 2024, supported by disinflation, rising real wages, stronger consumption, exports and investments, and record employment levels.

The European Commission expects Hungary could be “among the frontrunners” in terms of GDP growth in the EU, he added.

While domestic factors are reason for confidence, external factors justify caution, Varga said, pointing to shortages of raw materials and fixtures caused by the war in Ukraine and conflict in the Middle East, as well as the German economy’s weakening.

“This situation requires solidifying the balance and cautious planning,” he added.

The government will continue to reduce budget deficit and state debt levels, while putting the economy on a sustainable growth path in 2024, said Varga.

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