Hungary: The economy returns to growth in the first quarter
According to a preliminary estimate, GDP increased 1.1% year on year in the first quarter of this year, above the flat reading recorded in the last quarter of 2023 and market expectations. Q1’s reading marked the best result since Q4 2022. On a seasonally adjusted quarter-on-quarter basis, GDP also returned to growth, expanding 0.8%, up from the previous quarter’s flat reading. A complete breakdown will be released on 5 June.
According to the press release, the year-on-year result came on the back of rising output in the market services sector, outweighing falling industrial production.
The economy should bounce back this year. Declining inflation and interest rates, together with real wage growth, will translate into rebounds in household spending and investment. The industrial sector will also return to growth amid stronger external and domestic demand. A potential agreement with the EU on the further disbursement of funds poses an upside risk.
Commenting on the release, ING’s Peter Virovacz and Dávid Szonyi stated:
“The Hungarian economy has started to emerge from stagnation based on the first quarter preliminary GDP data. Without knowing the exact details of the growth structure, we maintain our 2024 full-year GDP forecast at 2.1%.”