Hungary’s GDP down 2.3% year-on-year in first quarter
Analysts say the contraction was more moderate than expected
Hungary’s economic output contracted by 2.3 percent per year in the first quarter, the Central Statistical Office (KSH) said on a first reading of the data. The magnitude of the contraction was the smallest since the onset of the coronavirus crisis. Hungary’s annual GDP has declined quarterly since the second quarter of 2020.
Adjusted for the effects of the calendar year, production fell 2%. GDP declined 1.8% based on seasonally adjusted and calendar year adjusted data.
In a quarterly comparison, GDP grew 1.9%, seasonally and calendar year adjusted. KSH said the growth was supported by the expansion of the industry, finance and insurance and ICT sectors.
Mihaly Varga, the Minister of Finance, told a press conference after the release of the data that the Hungarian economy had started to recover at a much faster pace than expected, reaching the highest growth rate in the ‘European Union on a quarterly basis. Here, analysts had forecast growth of just 0.3% and a steeper contraction of 4% year-on-year.
The data, he added, indicates that the economy has made good use of government subsidies and adapted well to the challenges of Covid. In addition, 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 also likely in the second quarter, Varga said, forecasting a faster-than-expected recovery, with 4.3% annual growth year-round.
ING Bank chief analyst Peter Virovacz said the quarterly growth along with the more moderate contraction in annual GDP signaled an earlier recovery, adding that a return to pre-crisis levels could be seen already. before summer. He said the monthly output of industry and construction suggested a larger contribution to the GDP of these sectors, adding that the government’s contribution could also come as a surprise. Virovacz said full-year growth would likely exceed 6%.
Takarekbank analyst Gergely Suppan predicted an annual growth of 7% due to the first quarter data which surprised on the upside.
KSH will release a detailed reading of Q1 GDP data on June 1.