Hungary: Growth hits 14-year high in Q1
May 15, 2019
The Hungarian economy continued to fire on all cylinders in the first quarter. According to preliminary data released by the Hungarian Central Statistical Office (KSH) on 15 May, economic growth in year-on-year terms reached 5.3% in Q1, above the 5.1% annual expansion recorded in the fourth quarter of last year and the strongest reading in over 14 years.
Sturdy domestic demand most likely remained in the driver’s seat in the quarter, although data on exports also points to a stronger external sector. Solid domestic purchases fueled growth in industrial production, which seems to have been largely unaffected by the marked cooling in the industrial sector in the EU—especially in Germany, which is the country’s main trading partner. Moreover, upbeat business sentiment and a buoyant construction sector signal that fixed investment expanded solidly, benefiting from growing inflows of EU funds. Meanwhile, retail sales recorded robust expansions throughout Q1, spurred by impressive wage growth and a tight labor market, and accelerating from Q4.
On a quarter-on-quarter, seasonally- and calendar-adjusted basis, GDP growth accelerated from 1.1% in Q4 2018 to 1.5% in Q1.
More detailed data will be released on 31 May.
The economy should perform robustly this year, although growth is poised to soften from 2018’s highs. Particularly, a slowdown in EU fund inflows will translate into a less impressive expansion in fixed investment, while higher inflation and fewer job gains will drag on consumer spending. Risks to the outlook stem mainly from the economic performance of the EU.