Hungary: Growth softens to over two-year low in Q4
February 14, 2020
According to a preliminary reading released by the Hungarian Central Statistics Office (KSH) on 14 February, annual economic growth decelerated to 4.5% in Q4, down from Q3’s 5.0% expansion and marking the weakest reading since Q3 2017, but beating market expectations nonetheless. The print brings growth for 2019 as a whole to 4.9%, down from 2018’s 5.1% rise. Meanwhile, in quarter-on-quarter, seasonally- and calendar-adjusted terms, growth slowed to 1.0% from Q3’s 1.1% expansion.
While a detailed breakdown of the result has yet to be released, available data suggests that a slowdown in the industrial and construction sectors likely drove the fourth quarter’s moderation: Manufacturing activity growth waned markedly as output in the all-important automotive sector ebbed, while merchandise export growth lost notable pace, weighed on by muted European demand. Moreover, the construction sector lost steam and business sentiment moderated, indicating curtailed fixed investment growth. Meanwhile, retail sales growth quickened in Q4, supported by a tight labor market, pointing to upbeat household spending.
Looking ahead, Peter Virovacz, chief economist for Hungary at ING, stated:
“On one hand, we have seen a consistent slowdown in GDP growth, albeit a moderate one, since mid-2018 […]. On the other hand, the better-than-expected fourth quarter figure means that Hungary was in a better shape when the first global shock, the coronavirus, hit the economy. So, looking forward, there is more uncertainty than normal. The coronavirus poses a downward threat via the supply chain channel while the expected fiscal stimulus, which we expect to be announced this weekend, is a potential positive.”
Growth is seen losing pace this year, as fixed investment loses strength on reduced absorption of EU funds. Key downside risks to the outlook include uncertainties about muted global economic growth, particularly in light of the recent outbreak of the coronavirus, which could hamper output in the all-important car sector.
More detailed GDP data will be released on 28 February.
Author: Hanna Andersson, Economist