Hungary Q2 GDP growth revised up to 4.8%

Analysis

The volume of GDP was 4.8% higher in Hungary in the second quarter of 2018 than in Q2 2017, a second estimate by the Central Statistical Office (KSH) shows. The figure was revised from the non-adjusted 4.6% in a flash estimate on August 14, mainly due to more favorable than expected performance of market-based services.

Unadjusted growth was the highest measured since Q4 2005, noted state news agency MTI.

According to seasonally and calendar-adjusted and reconciled data, the performance of the economy was up by 4.6% compared to the corresponding quarter of the previous year (revised from 4.4% in the flash estimate), and by 1.0% compared to the preceding quarter.

In the first half of 2018, economic performance – based on unadjusted data – was 4.6% higher than a year earlier.

On the production side, the value added by agriculture was 3.2% higher than one year earlier. The performance of industry increased by 3.6%, within which manufacturing rose by 4.0% compared to the same period of the previous year. Value added by construction rose by 23.7%, within which there was a significant growth in all branches.

The gross value added by services increase by 4.3% in total. The most substantial increase (7.7%) was recorded for the wholesale and retail trade, as well as accommodation and food service activities.

The performance of financial and insurance activities was up by 2.8%, the highest rise in 13 years, largely due to the improvement of financial intermediation services indirectly measured (FISIM); in addition, loans and deposits of non-financial corporations and households both increased.

Services contributed by 2.3 percentage points, industry by 0.8 of a percentage point, and construction by 0.9 of a percentage point to the 4.8% increase in GDP in Q2 2018, noted the KSH.

Household consumption continues to rise

On the expenditure side, the actual final consumption of households increased by 4.3% compared to the same period of the previous year.

Household final consumption expenditure, representing the largest proportion of the components of the actual final consumption of households, grew by 5.3%, within which volume increases were measured in most of the groups of expenditure. The domestic consumption expenditure of households realised on the territory of Hungary went up by 5.4%.

The volume of social transfers in kind from the government decreased by 1.2%, while that of the actual final consumption of the government grew by 1.9%.

As a result of the above trends, actual final consumption rose by 4.0%, said the KSH.

Gross fixed capital formation (investments) continued to increase, being 15% higher in the second quarter than in the corresponding period of the previous year. The volume of investments in construction and in machinery and equipment both went up considerably. A growth was observed in the volume of investment in the majority of industries.

Domestic utilization as a whole was up by 6.0% in the second quarter.

In the external trade of the national economy, a surplus of HUF 827 billion was generated in Q2 2018, lower at current prices than one year earlier. Exports rose by 6.2% and imports by 7.5%. In the trade in goods, exports grew by 5.9% and imports by 8.4%, while in services (including tourism) exports rose 7.2% and imports 3.0%.

Actual final consumption contributed by 2.8 percentage points and gross capital formation by 2.6 percentage points to the 4.8% growth in GDP in Q2 2018. The balance of external trade as a whole slowed down growth in economic performance by 0.5 of a percentage point.

Analysts see growth slowing slightly

Speaking to MTI, ING Bank chief analyst Péter Virovácz said growth was more balanced than in Q1 as industry and construction contributed a combined 1.7 percentage points to the headline figure. He projected full-year GDP growth of 4.3%.

K&H Bank chief analyst Dávid Németh said the fresh data show the pace of growth is slowing from previous quarters. He augured full-year growth of 4.2-4.3% and put growth for next year at 3.3%.

TakarékBank analyst Gergely Suppan was more optimistic, saying growth could continue at the same pace for the rest of the year, bringing annual growth to 4.6%. Next year, because of base effects, growth could slow to 4.1%, he added.

A flash estimate of GDP data for the third quarter of 2018 will be published by the KSH on November 14, with a second, more detailed estimate to follow on December 5.

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