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Big drop in Q1 GDP in line with expectations

A big drop in Hungary's first-quarter GDP was in line with expectations, analysts told MTI.

Hungary's GDP fell a calendar year-adjusted 5.8% and an unadjusted 6.4% in Q1 from the same period a year earlier, the Central Statistical Office (KSH) said in the morning.

Erste Bank's Orsolya Nyeste said the Q1 data were more or less in line with expectations, considering the latest industrial output, trade and retail data. It will not become clear what is behind the drop until the second reading is published, but it is probably a big fall in industrial exports, she added.

Nyeste, who had estimated Q1 GDP fell 6%, put the full-year contraction of Hungary's economy at 5.1%.

TakarékBank's Gergely Suppan said GDP dropped because of falling consumption, investments and state spending, but Hungary's net exports prevented an even steeper fall. Consumption will continue to be hit by falling real wages, rising unemployment, tighter lending conditions, households' higher forex debt burden and lower social transfers from the government throughout 2009. Investments will probably fall at a slower rate in the second half of the year because of EU transfers and the easing of the recession in the eurozone, he added.

Suppan put the full-year GDP decline at 5.0%-5.5%. (MTI – Econews)