Hungary: Second estimate raises growth in Q4
According to a second estimate released by the Central Statistics Office (KSH) on 1 March, the Hungarian economy continued to grow buoyantly in the fourth quarter, boosted by sturdy consumer spending and surging fixed investment. GDP expanded 5.1% on an annual basis. This was above the preliminary estimate of 5.0% released in February and matched the previous quarter’s rise. The reading brings growth for 2018 as whole to 4.9%, above 2017’s 4.1% expansion and the strongest reading since 2004.
Domestic demand was again the main driver of growth in the third quarter, expanding 7.2% (Q3: +8.6% year-on-year). Private consumption increased 4.3% in Q4, marginally below Q3’s 4.4% rise. Consumer spending was buttressed by strong wage growth and an extremely tight labor market, as well as by surging house prices. Fixed investment soared again in Q4, although growth decelerated somewhat from the outstanding reading of the previous quarter (Q4: +17.2% yoy; Q3: +20.0% yoy). The marked jump in capital spending was again buttressed by strong absorption of EU funds, upbeat business confidence and the ongoing boom in the construction sector. Sharp increases in investment were recorded in construction, and machinery and equipment. Government spending, meanwhile, contracted at a much sharper pace in the quarter (Q4: -7.0% yoy; Q3: -0.4% yoy).
On the external front, exports of goods and services rose 5.6% in the fourth quarter, a substantial acceleration from the previous quarter’s 2.3% gain. Meanwhile, imports also gained traction in Q4, albeit to a lesser extent, growing 8.2% year-on-year (Q3: +6.2% yoy). Consequently, the external sector subtracted 1.7 percentage points from overall growth in the fourth quarter.
Growth is set to moderate this year following an outstanding 2018 but will nevertheless remain robust. Fixed investment should continue to increase solidly, although its pace of expansion will likely slow due to rising interest rates and reduced inflows of EU funds. Likewise, household spending should remain healthy on tight labor market conditions and rising wages, although it will moderate due to stronger inflationary pressures.