Hungarian Parliament building

Hungary GDP Q1 2020

Hungary: Second reading confirms growth waned to over three-year low in Q1

A second GDP release published by Hungary’s Statistical Office on 29 May confirmed that growth, in annual terms, waned to 2.2% in the first quarter from the 4.5 expansion tallied in Q4 2019. Q1’s reading marked the worst reading since Q4 2016 as the fallout from the Covid-19 pandemic started to take its toll on the economy.

A detailed breakdown by components revealed that fixed investment contracted for the first time since Q4 2016 in the first quarter, falling 2.6% and contrasting Q4’s 7.0% expansion, amid downbeat business sentiment. Moreover, government consumption slowed markedly from 7.0% in the final quarter of 2019 to 2.4% in Q1, while household spending lost traction, coming in at 4.3%, down from Q4’s 4.8% rise, reflecting confinement measures imposed to halt the spread of the virus.

On the external front, exports of goods and services contracted 0.5% in Q1 (Q4: +3.3% yoy), constrained by global lockdown measures. Imports of goods and services moderated to 1.3% in Q1 (Q4: +5.9% yoy).

On a seasonally-adjusted quarter-on-quarter basis, GDP fell 0.4% in Q1, contrasting Q4’s 0.7% expansion. Q1’s reading marked the worst reading since Q1 2016.

Commenting on the reading, Peter Virovacz, senior economist at ING Hungary, noted:

“It was good to see that the Hungarian economy held up quite well in 1Q20, but the economic reality of Covid-19 will be revealed in the next quarter. We have several scenarios, based on how lockdowns, vaccination, social distancing etc, play out locally and globally. Our base case expects that the worst will be behind us by the second quarter and a mild rebound comes in the second half of the year. […] In a worst case, this ‘crisis of confidence’ could still morph into a deeper financial and economic depression.”

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