Hungary: Economy grows at slowest pace in a year in Q2
August 14, 2019
Economic growth decelerated to 4.9% year-on-year in the second quarter, from Q1’s 5.3% expansion, according to a preliminary estimate released by the Hungarian Central Statistical Office (KSH) on 14 August. If confirmed, this would mark the weakest acceleration since Q2 2018.
While a detailed breakdown of the result has yet to be released, available data for the second quarter revealed a slowdown in the industrial, construction, and retail sectors. External headwinds weighed on manufacturing activity and export performance in the quarter amid a downturn in Germany and other key trading partners in the EU. Moreover, a loss of steam in the construction sector suggests fixed investment growth slid amid tumbling business confidence. Despite employment gains, a softer upturn in retail sales growth indicates private consumption also decelerated in the quarter, likely owing to a combination of rising inflation weighing on households’ purchasing power and downbeat consumer confidence.
In quarter-on-quarter, seasonally- and calendar-adjusted terms, growth fell to 1.1% in Q2 from 1.4% in Q1.
Growth is seen weakening this year, as fixed investment loses strength on reduced absorption of EU funds. That said, a pick-up in exports, a rebound in government spending and solid private consumption, supported by a tight labor market and rising wages, should keep the economy growing robustly.
More detailed data will be released on 30 August.
Author: Nihad Ahmed, Economist