Hungary’s economy contracted by 0.2 percent in Q2 versus the previous quarter, while GDP grew by 1.5 percent year-over-year. Analysts polled by Portfolio had expected 0.5 percent and 2.3 percent growth, respectively, meaning data came in well below expectations.
After the first quarter saw growth of 0.7 percent on a quarterly basis, analysts believed the Hungarian economy had emerged from its recessionary stagnation and household consumption would rebound. Although consumers did spend in some segments, overall growth is nowhere near expectations.
The weak European economy and massive contraction in electric vehicle purchases have also hurt Hungarian exports. Aside from weak household consumption and exports, there was also no recovery in investment.
Minister of the National Economy Márton Nagy had a rather gloomy outlook, stating: “We expected a further improvement compared to the first quarter, but it seems that this is in danger, mainly because of industry.” Portfolio highlighted the minister’s dire tone, indicating he “may have additional information on which to base his significantly worse picture than market expectations.”
The belief is now that the Hungarian Central Statistical Office (KSH) will be releasing some lower numbers, Note: There is apparently no hard monthly real economic data available for the last month of the quarter, meaning estimates had not been able to take into account all data.
In its initial analysis, KSH notes construction and real estate as growth contributors and a shortfall in industrial activity.
In the first half of the year, the Hungarian economy’s performance grew by only 1.5 percent versus the same period last year. In light of this most recent data, the economy will need to rebound strongly (at least 2 percent, according to Portfolio) in Q3 and Q4 to meet the government’s 2.5 percent GDP growth forecast for the year.
Portfolio also notes the impact of agriculture and weather-related impacts on its output as having been decisive over the last two years. If this is so, then the recent heat waves and resulting crop losses in Hungary are not a good sign.
