Investment in Hungary
GDP records sharpest contraction since Q1 2021 in Q1
GDP contracted 0.9% year on year in the first quarter, below the 0.4% expansion seen in the fourth quarter of last year. Q1’s reading marked the worst reading since Q1 2021.
Household spending contracted 2.5% in Q1, compared to a 2.2% expansion in Q4, as elevated inflation squeezed purchasing power and savings, and consumer sentiment was downbeat. Meanwhile, public spending declined 4.6% in Q1 (Q4 2022: -4.9% yoy). Moreover, fixed investment shrank 6.0% in Q1, following the 9.0% decrease logged in the prior quarter, hit by high interest rates and gloomy economic prospects.
On the external front, exports of goods and services expanded 6.6% in Q1 (Q4 2022: +12.1% yoy). In addition, imports of goods and services increased 1.9% in Q1 (Q4 2022: +10.2% yoy).
On a seasonally adjusted quarter-on-quarter basis, economic activity contracted 0.3% in Q1, following the previous quarter’s 0.6% decrease. Q1’s reading marked the best result since Q2 2022.
Commenting on the outlook, Orsolya Nyeste, analyst at Erste, stated:
“In the coming quarters, agriculture continues to substantially contribute to the GDP due to the extremely low base figures from last year. Meanwhile, inflation would decline faster in H2, supporting consumption [somewhat]. On the other hand, the high interest rate environment, the government’s austerity measures, and the lack of EU funds delay the recovery of investment activity. In addition, uncertainties surrounding global growth prospects may hinder the exploitation of export opportunities.”
Hungary Investment Chart
Hungary Investment Data
|Fixed Investment (ann. var. %)||19.7||16.3||12.8||-7.1||6.5|