Hungary GDP down 2.3pc y/y in Q1

Adjusted for calendar-year effects, output dropped by 2 percent. GDP declined by 1.8 percent based on a seasonally and calendar year-adjusted data.

In a quarter-on-quarter comparison, GDP rose a seasonally and calendar year-adjusted 1.9 percent. KSH said that growth was supported by expansion in the industrial, finance and insurance, and ICT sectors.

Mihaly Varga, the finance minister, told a press conference after the data release that Hungary’s economy started its recovery at a far faster clip than expected, achieving the highest growth rate in the European Union on a quarter-on-quarter basis. Here, analysts had forecast growth of a mere 0.3 percent and a sharper contraction of 4 percent year on year.

The data, he added, indicate that the economy has put government subsidies to good use and adapted to Covid-related challenges well. Further, the combination of Hungary’s vaccination campaign and economic policy has given the country a head start over other EU member states, he said. Double-digit growth is likely in the second quarter, too, Varga said, forecasting a speedier recovery than expected, with annual growth of 4.3 percent in the full year.

ING Bank chief analyst Peter Virovacz said the quarter-on-quarter growth as well as the milder contraction in annual GDP signalled an earlier recovery, adding that a return to pre-crisis levels could be seen already before the summer. He said monthly industrial and construction industry output suggest a bigger contribution to GDP by those sectors, adding that the government’s contribution may also be cause for surprise. Virovacz said full-year growth was likely to exceed 6 percent.

Takarekbank analyst Gergely Suppan predicted full-year growth as high as 7 percent as a result of the Q1 data that surprised on the upside.

KSH will publish a detailed reading of the Q1 GDP data on June 1.