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Analyst sees little chance of improved Q2 GDP growth

A second reading of Hungary's Q2 GDP growth due out Friday is unlikely present any improvement over the 2.2% preliminary figure, ING chief analyst Dávid Németh said.

The latest retail data for the period show falling domestic demand, and fixed capital formation is also certain not to raise the preliminary figure, considering a 2.1% fall in Q2 investments published last Friday, Németh said. Net export growth slowed in Q2, as did import growth, he added.

The Central Statistical Office allows a plus-or-minus two-tenths of a percentage point deviation between its preliminary GDP figure and the figure published in the second reading.

The main questions on the production side will be the contribution to growth of the farm sector, which has reported a big grain harvest following last year's drought, and the size of the slowdown in the expansion of the service sector, Németh said.

The outlook for the rest of 2008 is not reassuring. Investments funded with EU development monies could be put off until next year, and the contracting construction sector can count on only limited state support. There are few positive signs for retail consumption either. Neither area is likely to start expanding until Q4, in a best-case scenario, Németh said. The recession in eurozone countries is expected to continue in Q3, which is likely to cause Hungary's trade surplus to narrow, he added.

The outlook for 2009 is better. Mercedes will start building a regional manufacturing base in Hungary, state spending should pick up slightly in the run-up to the elections and inflows of EU development funding should boost fixed capital accumulation, lifting GDP growth to as much as 3%, Németh said. (MTI – Econews)