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Hungary GDP Q3 2023

Hungary: GDP records best reading this year in Q3

GDP fell at a more moderate rate of 0.4% year on year in the third quarter, above the 2.4% contraction recorded in the second quarter. Q3’s reading marked the best result since Q4 2022. On a seasonally adjusted quarter-on-quarter basis, economic activity expanded 0.9% in Q3, following the previous period’s flat reading. Q3’s reading marked the best result since Q2 2022.

Private consumption dropped at a softer pace of 2.7% yoy in the third quarter, which marked the best reading since Q4 2022 (Q2: -3.5% yoy), amid easing price pressures and strong wage growth. Public consumption sped up to a 4.4% expansion in Q3 (Q2: +1.0% yoy). Meanwhile, fixed investment declined at a slightly more moderate pace of 15.1% in Q3 from the 15.2% decrease recorded in the previous quarter.

On the external front, exports of goods and services contracted 3.6% in Q3, marking the worst result since Q3 2020 (Q2: +0.3% yoy), weighed down by Germany’s ailing economy. In addition, imports of goods and services dropped at a steeper pace of 8.7% in Q3 (Q2: -6.0% yoy), marking the worst reading since Q2 2020.

The economy should rebound next year. Declining inflation and interest rates, together with healthy real wage growth, will buttress household spending and investment. The industrial sector will also return to growth, bolstered by stronger external and domestic demand. A potential agreement with the EU on the disbursement of funds poses an upside risk.

Commenting on the outlook, János Nagy, analyst at Erste, stated:

“After the disappointing 1H 2023 figures, the second half of this year started to bring a rebound. On one hand, as domestic consumption is set to somewhat improve in parallel with the strongly easing inflationary pressure, looking ahead this process could continue. […] On the other hand, the ongoing normalization, the interest rate environment is still high, while delay of disbursement of EU funds and yet ongoing fiscal consolidation negatively affect government investments.”

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