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Analysts put Q3 GDP drop at 6.7%

Hungary's third-quarter GDP could have dropped 6.7% from a year earlier, level with the first quarter, but less than a 7.5% yr/yr fall in the second, according to analysts polled by the business daily Napi Gazdaság.

The analysts expect a 6.3% drop for the entire year as the last quarter is bolstered by the base figures, and the consensus for 2010 was a growth of 0.3%.

The Central Statistical Office (KSH) will publish preliminary Q3 figures on Friday morning, and a detailed second reading on December 9.

Consumption could have fallen more than before in Q3 because of the 5 percentage-point VAT increase taking effect on July 1, Orsolya Nyeste of Erste said. Based on the large trade surplus, however, net exports considerably tempered the affect of dropping domestic demand.

The decline in consumption will not yet stop next year, and private investments have not much room for growth either, Gergely Fórián Szabó of Pioneer Fund Management said. Investment activity in the manufacturing sector is highly uncertain, and the decline in home and real estate construction will certainly lower the average figure. Although it is possible that the next government will achieve a larger budget deficit next year than the officially targeted 3.8%-of-GDP, the additional expenditures will probably result either from the consolidation of state-owned enterprises or structural reforms, and will not boost consumption, so this will not change the projected GDP, he added. A potential tax cut is possible, but that would not have its effect felt before 2011, the analyst said.

Therefore, the 0.3% consensus forecast for next year will largely depend on external factors, Nyeste of Erste said. If the global economic recovery is quick, a positive surprise would also be possible, however, the “growth” rate could stay negative in the event of a “W-shaped” curve. If the basic scenario materializes, the GDP growth could return to 2.8% in 2011. (MTI – Econews)