Hungary: Second estimate raises growth in Q3
December 10, 2018
According to a second estimate released by the Central Statistics Office (KSH) on 5 December, the Hungarian economy continued to grow robustly in the third quarter, boosted by strong consumer spending and skyrocketing fixed investment. GDP expanded 4.9% on an annual basis. This was above the preliminary estimate of 4.8% released a month earlier and matched the previous quarter’s rise, which had marked the fastest expansion since Q4 2005.
Domestic demand was again the main driver of growth in the third quarter, accelerating from 5.0% annual growth in Q2 to a 7.2% increase. Private consumption expanded a strong 4.7% in Q3, marginally below Q2’s 4.8% rise. Consumer spending was buttressed by strong wage growth and an extremely tight labor market. Fixed investment soared again in Q3, with growth accelerating from the already marked reading of the previous quarter (Q3: +20.0% year-on-year; Q2: +15.0% yoy). The double-digit jump in capital spending was buoyed by strong absorption of EU funds, upbeat business confidence and the ongoing boom in the real estate market. Sharp increases in investment were recorded in construction, and machinery and equipment. Government spending, meanwhile, lost pace in the quarter (Q3: +0.1% yoy; Q2: +0.6% yoy).
On the external front, exports of goods and services rose 3.4% in the third quarter, a substantial deceleration from the previous quarter’s 8.6% gain. Meanwhile, imports also lost traction in Q3, albeit to a lesser extent, growing 5.9% year-on-year (Q2: +9.1% yoy). Consequently, the external sector subtracted 1.7 percentage points from overall growth in the third quarter.
Although growth is set to moderate next year from this year’s outstanding performance, it will nonetheless remain healthy. The primary driver of the deceleration will likely be a marked slowdown in fixed investment growth, due to a softer absorption of EU funds. Consumer spending will also likely lose some steam, as wage growth gradually declines and job growth weakens.