Hungary: Economy continues to recover in Q4
February 16, 2021
According to a preliminary reading, economic activity continued to recover in the fourth quarter of 2020, albeit at a considerably softer pace than in Q3. GDP expanded 1.1% on a seasonally-adjusted quarter-on-quarter basis in the fourth quarter following Q3’s 11.4% rebound, which had marked the strongest expansion on record. On an annual basis, the pace of contraction eased from 4.6% in Q3 to 3.7% in Q4. For the year as a whole, the economy shrank a heavy 5.1%, strongly contrasting 2019’s 4.6% expansion.
While a detailed breakdown is yet to be released, available data suggests that a sharper drop in retail sales and weakening consumer sentiment amid tightened Covid-19 restrictions weighed on household spending and on the tertiary sector in the fourth quarter. Moreover, declining business confidence and downturns in industrial production in November-December point to softer private sector activity.
More detailed GDP data will be released on 2 March.
Looking ahead, GDP is seen rebounding this year as the economy heals from the blow dealt by the pandemic. Recovering consumer and capital spending, supported by fiscal and monetary stimulus, and reviving foreign demand will spur growth. However, further flare-ups of Covid-19 cases and vaccine delays raise uncertainty, clouding the outlook.