Hungary: Growth picks up steam in Q3
December 11, 2017
The economy continues to grow at a solid pace. According to revised data released by the Central Statistics Office (KSH) on 5 December, the economy expanded 3.9% annually in the third quarter, matching the preliminary estimate released a month earlier. The print marks an acceleration from Q2’s 3.3% annual expansion and puts the economy on track to expand at a solid rate in 2017, as cumulative growth in the first three quarters reached 3.8%.
The domestic economy continues to be the main driver of economic growth. Growth in fixed investment again surpassed 20% (Q3: +21.6% year-on-year; Q2: +26.1% yoy), as EU funds flow into the economy and lax monetary policy pushed business confidence to all-time highs. Investment in construction and machinery, and equipment investment also grew at a sharp pace in the third quarter. Growth in private consumption decelerated marginally, but remained buoyant nonetheless (Q3: +4.8% yoy; Q2: +4.7% yoy). Private consumption continues to be supported by declining unemployment, higher wages in the public sector, benign inflation and ease of access to credit. Government consumption growth rebounded from a 2.7% contraction in Q2 to a 2.5% increase in Q3, the first expansion since Q2 2016. Overall, domestic demand expanded 4.4% in the third quarter, significantly above the 2.6% growth in the previous quarter.
The external sector, however, dragged on growth in the third quarter. Growth in exports moderated from 6.0% in Q2 to 4.5% in Q3. Growth in imports, on the other hand, reached 9.3% (Q2: +7.8% yoy), indicating buoyant private consumption. As growth in imports outpaced growth in exports, the external sector made a negative contribution to growth in the third quarter.
Hungary GDP Forecast
FocusEconomics Consensus Forecast panelists expect the economy to grow 3.2% in 2018, which is up 0.1 percentage points from last month’s projection. For 2019, the panel expects growth of 3.1%.