Hungary unlikely to hit 2016 growth target despite revival in second quarter

By bne IntelliNews September 6, 2016

Hungary’s second quarter growth was confirmed at 2.6% y/y when the statistics office KSH released a second estimate on September 6. However, the data also casts some doubt on the economy’s ability to maintain momentum.

The release backs up the flash estimate issued by KSH on August 12, which was met with relief after a collapse in industrial output and investment had dragged GDP growth to a startling slowdown in January-March. The economy contracted 0.8% in the first quarter and 1.1% q/q.

The momentum in April-June was largely provided by industry, in which output spiked in April and May. Industrial production has, however, since sagged back into contraction in June and July. On top of ugly investment data for the second quarter, that only adds to conviction in the market that Hungary will struggle to achieve the central bank’s growth target of 2.8% for the full year.

In adjusted terms, the Q2 growth was a little less impressive at 1.8% y/y, which was 0.1pp higher than the preliminary figure released last month. In quarterly terms, the economy recorded a 1% gain. The second quarter upturn was not strong enough to outweigh the slump in January-March, leaving first half growth at 1.4% y/y.

On top of the push from industry, agriculture and services offered momentum to the economy in the second quarter. That said, financial and insurance services showed contraction, while wholesale and retail trade expanded at 7.7%. That reflects the fact that consumption is still the major driver of the economy, as the tightening labour market and low inflation raise confidence. Construction remains a drag, with public projects having dried up on the back of reduced EU funds in the new 2014-20 budgetary window.

Related Articles

Kosovo's GDP growth to outstrip regional peers in 2017, IMF says

Kosovo’s economic growth is expected to reach 4.1% in 2017, among the highest in the region, which will be driven by high investment and exports, the International Monetary Fund (IMF) said on ... more

Kazakhstan’s Bank of Astana SPO to be first ever placement of foreign bank on Moscow Stock Exchange

Kazakhstan’s Bank of Astana (Astana Banki) plans to conduct a secondary offering of shares (SPO) on the Moscow Stock Exchange, RNS news agency reported last week. Bidding will begin on December 14. ... more

Mongolia named among 17 nations on EU’s first ever tax haven blacklist

Mongolia has been listed on the European Union’s first ever tax haven blacklist among 17 countries including South Korea, Namibia, Panama, Trinidad & Tobago, Bahrain and ... more