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Takarékbank raises 2021 GDP growth forecast to 8%

Analysis

Takarékbank has raised its forecast for this year's GDP growth to 8% from 7.7% on a faster-than-expected pickup in the second quarter, the lender said on Tuesday.

Finance Minister Mihály Varga said late in September that GDP growth could reach 7-7.5% this year.

Senior analyst Gergely Suppan said Takarékbank projects quarter-on-quarter GDP growth of 1-1.5% in Q3 and Q4, although acknowledging a chance that growth could reach 2%. He added that the forecast is "cautious" because of the unknown scale of the impact the chip shortage will have.

Takarékbank's "worst-case scenario" puts GDP growth at 7.3%, Suppan said, adding that even if the economy stagnated in the second half, full-year growth would still reach 6.8%.

He said the fourth wave of the pandemic is not expected to result in "drastic lockdowns" in Hungary, although people without immunity certificates could face restrictions.  

Takarékbank forecasts a 2.9% increase in retail sales this year, but expects a personal income tax refund for families with children, a pensioners premium and bonuses for soldiers to leave an extra HUF 1.2 trillion with consumers, giving retail sales "an enormous boost" in 2022.

GDP is already 0.9% over pre-crisis levels, he said, but pointed to imbalances, noting contributions to growth by the ICT, financial, insurance and real estate sectors, while the recreation, tourism and passenger transport sectors have yet to recover. The farm sector is also underperforming, but because of bad weather, he added.

Takarékbank analysts put average annual inflation at 4.7% this year before falling to 3.5% in 2022. He warned that higher raw material prices could cause "a big problem", adding that gas prices are already 30-50% higher in some European countries.

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