Hungary's Q1 GDP surprises to the upside

Hungary's Q1 GDP surprises to the upside
By bne IntelliNews May 16, 2017

Hungary’s economy accelerated to growth of 4.1% in the first quarter of 2017, the fastest pace since the second quarter of 2014, according to unadjusted preliminary data, statistics office KSH reported on May 16.

The result is a serious rise from the disappointing 1.6% gain seen in Q4 2016, and above market expectations of 3.5%. The reading showed a robust 1.3% q/q expansion. The main contributors to growth were industry, market services and the low base figure, analysts suggest.

After a weak year in 2016, industrial production picked up in the first quarter, spurred by strong external demand to a rise of 8%. Construction output surged 24.7% in the first quarter and market services also delivered robust growth, KSH officials said. Household consumption is also seen as a major component in the expansion, lifted by robust wage growth and stronger purchasing power of households.

Investment is likely to have been the main driver of growth, helped by the housing market boom and new manufacturing capacities in the vehicle sector, Takarekbank said in a note. The effects of EU subsidies on new investments will keep growth above the 4% level in 2018, they add.

The European Commission and the IMF recently raised their outlooks on Hungary, but their forecasts of 3.6% and 2.9%, respectively, for full year GDP growth remain well below the government's bullish 4.1% projections.

Analysts at KBC said they will maintain their full-year growth forecast of 3.7% as the low base figures will be phased out in the coming quarters and due to downside risks in agriculture due to bad weather in ApriI. Hungarian analysts made hints of revising their growth projections, once the detailed numbers are out on June 7.

Among six Central and South Eastern European countries, GDP growth was the second highest in Hungary behind Romania's 5.6% expansion. As the Eurozone first quarter GDP came in at 1.7% y/y, the growth gap between Hungary and single-currency area urozone is the steepest since 2013-2014, when Hungary enjoyed a huge influx of EU funds, portfolio.hu observed.


 

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