Hungary: Hungarian economy enters recession
September 7, 2012
In the second quarter, GDP contracted 1.3% over the same period last year, according to revised data released by the Central Statistics Office (KSH) on 7 September. The figure, which came in a notch below the 1.2% flash estimate reported on 14 August, represents the second consecutive drop in output and the worst outturn since the last quarter of 2009. Compared to the preceding quarter, GDP decreased a seasonally adjusted 0.2%, which came in above the 1.0% drop recorded in the Q1 and signifies that the Hungarian economy fell into recession. Domestic demand fell 3.4% (Q1: -3.0% year-on-year), mostly reflecting a further deterioration in total consumption, which stepped down from a 0.5% contraction in the first quarter to a 1.8% decline in the second quarter. While private consumption decreased 1.6% in the second quarter, government consumption swung from a 1.0% expansion to a 2.9% decline. Moreover, fixed investment remained mired in the red, albeit moderating the pace of decline, and stepped up from a 6.6% contraction in the first quarter to a 4.5% drop in the second. A lower pace of inventory building further contributed to the decline. On the external side, exports accelerated a notch from a 1.9% increase in the first quarter to a 2.1% expansion in the second. However, imports followed suit and swung from a 0.3% contraction in the first quarter to a 0.2% increase. As a result, the net contribution from the external sector to overall growth remained positive but deteriorated from 2.2 percentage points in the fourth quarter to 1.8 percentage points in the second. In its latest inflation report from June, the Central Bank projects the economy to contract 0.8% this year and to expand 0.8% in 2013.