Hungary: GDP records best reading since Q4 2022 in Q4
GDP was flat on a year-on-year basis in the fourth quarter, above the 0.4% contraction seen in the third quarter. Q4’s reading marked the best result since Q4 2022. On a seasonally-adjusted quarter-on-quarter basis, GDP was unchanged from Q3 in Q4, down from the previous quarter’s 0.8% increase.
Private consumption fell at a milder rate of 1.2% year-on-year in the fourth quarter, benefiting from easing inflation and strong wage growth, which marked the best reading since Q4 2022 (Q3: -3.0% yoy). Moreover, fixed investment dropped at a more moderate pace of 3.0% in Q4, from the 12.3% contraction recorded in the previous quarter. Conversely, public spending dropped at the sharpest pace since Q3 2023, contracting 3.8% (Q3: +4.5% yoy).
On the external front, exports of goods and services fell 4.7% on an annual basis in the fourth quarter, which was below the third quarter’s 3.1% contraction. In addition, imports of goods and services slid at a sharper pace of 9.0% in Q4 (Q3: -8.1% yoy).
The economy should bounce back this year. Declining inflation and interest rates, together with real wage growth, will translate into rebounds in household spending and investment. The industrial sector will also return to growth amid stronger external and domestic demand. A potential agreement with the EU on the further disbursement of funds poses an upside risk.
Commenting on the outlook, economists at EIU stated:
“With trading partners in Europe, most especially Germany, forecast to grow slowly at best, Hungary’s economic recovery will be tepid in 2024. Growth will pick up in the second half of the year and more strongly in 2025. The consumer sector will also recover after contracting sharply in 2023 owing to two years of high inflation and high interest rates.”