Hungary: Growth slows to over three-year low in Q1
May 15, 2020
According to a preliminary reading released by the Hungarian Central Statistics Office (KSH) on 15 May, economic activity lost steam in the first quarter, with GDP increasing 2.2% year-on-year (Q4: +4.5% year-on-year). Q1's reading marked the slowest expansion since Q4 2016 and reflected the impact of the coronavirus health crisis on economic activity. On a seasonally-adjusted quarter-on-quarter basis, economic activity fell 0.4% in Q1, contrasting Q4’s 0.7% increase and marking the first decrease since Q1 2016.
While a detailed breakdown of the result has yet to be released, available data suggests that marked slowdowns in the industrial and constructions sectors amid disrupted supply chains and confinement measures likely drove Q1’s moderation. Moreover, business and consumer sentiment deteriorated sharply in the quarter, hinting at curtailed fixed investment growth and hampered consumer spending.
GDP is expected to fall this year as the Covid-19 pandemic deals a heavy blow to the economy. Domestic containment measures will depress household spending and fixed investment, while a feeble global trading environment is set to hammer the external sector. Fiscal stimulus and liquidity-boosting measures should offer some support, however.
More detailed GDP data will be released on 29 May.
Author: Hanna Andersson, Economist