Hungary's economy exited technical recession after seasonally adjusted GDP grew 0.7% q/q in the first quarter of 2013, the statistics office said on June 6, confirming the flash estimate. The local economy contracted 1.4% q/q in Q1 2012, by 0.6% q/q in Q2 2012, followed by stagnation in Q3 and a 0.4% q/q drop in Q4 2012.

The statistical office also confirmed the 0.9% y/y contraction in Q1 2013, which however was much slower than the 2.7% y/y drop in Q4 2012.

On the supply side, the agriculture output increased by 12.3% y/y, which was partly due to low base effect. The sector contributed with 0.3pps to the GDP growth. The construction sector increased by 4.2% y/y, on the back of better performance in both construction of buildings and the civil engineering segments. Thus, the construction also had a positive 0.1pps contribution to GDP in Q1. By contrast, the industrial production decreased by 3.2% y/y, following a 2.5% y/y fall in manufacturing. Thus the industry, which had been a key growth driver since Q1 2010, contributed with a negative 0.7pps to GDP contraction. The weak external demand led to a decline in the production of computer, electronic and optical products. On a positive view, the manufacturing of transport equipment expanded in Q1. Services declined by 0.8% y/y and contributed by negative 0.5pps to GDP growth.

On the demand side, net exports continued to have a positive contribution (0.4pps) to the GDP growth. Exports increased by 1.3% y/y in Q1, faster than imports’ growth of 0.9% y/y. Consumption fell by 1.4% y/y, due to shrinking private and government consumption. Gross capital formation contracted by 2% y/y, as investments saw a 5.6% annual decline in Q1. Among industries having major share in investments, there was a significant drop in manufacturing.