Hungary GDP (HUF bn)

GDP growth slows in the fourth quarter

GDP growth moderated to 0.4% year on year in the fourth quarter from 4.0% in the third quarter. A downturn in domestic demand amid soaring inflation, higher interest rates and depressed consumer and business sentiment drove the deceleration.

Private consumption increased 1.7% in the fourth quarter, below the second quarter’s 4.3% expansion, as spending felt the pinch of decreasing purchasing power and weak sentiment. Government consumption fell 4.5% (Q3: -0.5% yoy). Meanwhile, fixed investment slumped 8.6%, following 4.1% growth in the prior quarter, amid heightened uncertainty surrounding the economic outlook.

On the external front, exports of goods and services growth decelerated to 9.8% yoy in the fourth quarter (Q3: +8.1% yoy), sustained by a resilient industrial sector. Meanwhile, imports of goods and services growth decelerated to 9.2% in Q4 (Q3: +11.5% yoy).

On a seasonally adjusted quarter-on-quarter basis, the economy shrank 0.4% in Q4, following the previous quarter’s 0.7% contraction.

Commenting on the outlook, economists at ING stated:

“According to our current estimates, Hungarian GDP will expand by 0.7% in 2023, with a two-sided growth profile. The economy will likely contract in the first quarter of this year, as high inflation suffocates economic activity on various fronts: from private consumption to investments. As the disinflationary process slowly unfolds from February and strengthens from the middle of the year, we expect a very shallow quarter-on-quarter rebound in GDP growth.”