Hungary: The economy contracts at softer pace in Q4
According to a preliminary reading, the economy shrank 0.4% on a seasonally adjusted quarter-on-quarter basis in the fourth quarter, following Q3’s 0.7% contraction. On an annual basis, the pace of expansion slowed to 0.4% in Q4 from 4.0% in Q3.
While a detailed breakdown is set to be released on 2 March, the press release highlighted that a downturn in agriculture restrained sequential growth, while activity in the market services sector and industry were the main drivers of the year-on-year expansion.
The economy should remain in a tough spot in the first quarter of this year, constrained by elevated inflation, high interest rates and downbeat sentiment. Looking further ahead, GDP should record a negligible expansion this year. Domestic demand will be buffeted by high inflation, shrinking savings and tight monetary policy, while global headwinds will weigh on the external sector. A further escalation of the war in Ukraine poses the main downside risk, while a timely allocation of EU funds poses an upside risk.