Hungary's Q4 GDP rose 4.5% y/y, bringing full-year GDP growth to 4.9%, just 0.1pp below the 5% growth in 2018, according to detailed data from the Central Statistics Office (KSH) on February 28. 

At current prices output reached HUF46.8 trillion (€138.4bn). On Friday, KSH confirmed the preliminary data, which came in above expectations. On a quarterly basis, GDP grew 1%, the third-highest in Europe.

Hungary's economy expanded 5.3% in Q1, 4.9% in Q2 and 5% in Q3, beating forecasts as analysts expected growth to decelerate in tandem with the slowdown in West European countries. 

The figures show that growth was broad based but market-based services was a leading contributor to growth. The only sector without a positive contribution in Q4 was agriculture.

Services contributed to the growth by 2.3pp and industry and construction by 1pp each. The value-added increased by 21% in construction, by 5% in industry and by 4.2% in services and it diminished by 0.3% in agriculture.

From the expenditure approach, actual final consumption raised the GDP growth rate by 2.8pp and gross capital formation by 2.6pp. The balance of external trade as a whole slowed down the growth of economic performance by 0.4pp.

The rate of domestic consumption continues to exceed that of the headline GDP growth, which will remain the driver of growth in 2020, analysts said.

Risks tilted to the downside

As for this year's outlook, economists pointed out downside risks tied to the coronavirus outbreak.

ING maintained its 3.8% forecast, while issuing a growth warning as risks "are clearly and significantly tilted to the downside, especially in the first half". The growth impact will depend on the severity of the supply chain disruption, as well as the number of reported cases and quarantine measures. The sharp fall in inventories due to supply chain disruptions could dampen economic growth in the coming quarters, it said.

Growth in domestic consumption looks set to continue at the current pace, while investment growth may be more subdued, according to Erste Bank, which expects 3.6% growth in 2020.

A leading analyst from Takarekbank highlighted the 14% growth of investment in 2019, which reached a new high of HUF10.5 trillion for the year. 

Even as the pace of growth slowed from an annualised 5% in Q3 to 4.5% in Q4, the Hungarian economy remained at the forefront of the EU, even though the economy of its important foreign trade partner Germany stagnated, according to a researcher from government-funded think tank Szazadveg.

Hungary's Finance Minister Mihaly Varga slashed the government's 2020 growth estimate from 4% to 3.5% after the release of the preliminary data on February 14, citing difficulties facing Germany's automotive industry, the impact of the coronavirus on tourism and the supply chain, and trade tensions. 

With stimulus measures expected later this year, Varga said the 4% target is also achievable. 

The government is working to cut small business taxes and taxes on labour to shield Hungary from the impact of the global slowdown, Prime Minister Viktor Orban said during his annual state of the nation speech two weeks ago.

Hungary aims to post growth exceeding that of the Eurozone by at least 2pp.