The Hungarian economy shrank by 13.6 percent year-on-year in the second quarter of the year, but the country still fared better than the European Union average, conservative daily Magyar Nemzet reports.
While the raw figure was -13.6 percent, the seasonally and working-day adjusted figure was -13.5 percent, still well under analysts’ expectations of a 10 to 11 percent drop.
Due to the coronavirus restrictions introduced in March, all sectors of the economy suffered a serious decline, with services and the manufacturing sector the worst hit. Given that the first quarter of the year the economy grew by 2 percent, the decline for the first six months of the year is 6.1 percent.
“The GDP data was a negative surprise, as analysts expected a slower decline,” said Dániel Molnár, the macroeconomics analyst at think-tank Századvég Gazdaságkutató. “Although the detailed data will only be available at the end of the month, it is already clear that the coronavirus-related restrictions affected the entire economy.”
He added that it was difficult to make full-year forecasts given that it is unknown whether there will be a second wave this year and it is also difficult to gauge the recovery rate of export demand. He said, however, that their own full-year estimate was a decline of 3 to 4 percent, followed by a rebound next year.
Gergely Suppan, head analyst of Takarékbank, said that the decline was mainly a result of many service-related restrictions as well as the fact that the entire Hungarian automotive industry came to a halt in April. However, the gradual easing of the restrictions and the restart of the car assembly plants helped the economy from May, which will be visible in a significant recovery in the third quarter.
Suppan said that retail trade and other services were the fastest to recover, while the car industry reached pre-pandemic production levels by the end of July.
He said that in light of the second-quarter data, he revised downwards his own full-year forecast to a drop of 3.9 percent from a previous expectation of -3.2 percent. His second-year forecast — mainly due to a lower basis — was up to 7.2 percent from a previous 6.3 percent. He added, however, that the risk of a second coronavirus wave was still a real one which could slow down recovery efforts.
Hungarian economy fares better than the EU
The Finance Ministry said in a statement that as a result of factory closures, industrial output dropped by 30 percent in April and May while the number of guest nights in hotels fell by 97 percent. The ministry added, however, that the data was still better than the 14.4 percent fall in the European Union.
“Hungary is among the countries with the most successful response against the coronavirus due to the timely measures to protect life and health,” the ministry said. “Before this decline, the Hungarian economy had a solid foundation, showing a balanced growth since 2013.”
The ministry also said that in large part due to an economic stimulus package amounting to about 20 percent of the GDP, it expected a GDP growth of around five percent next year.