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Economy contracts 1.7% in 2012, plunges 2.7% in Q4

Hungary’s economy took a nosedive in the fourth quarter in 2012, the extent of the contraction surprising even pessimistic analysts. Opposed to the general expectation of a 2% of gross domestic product contraction, the slump came in at a whopping 2.7% according to preliminary figures published by the Central Statistics Office (KSH). The result confirms that last year ended with recession for the country with contraction of 1.7%.
     The National Economy Ministry blamed the unusually harsh drought which in itself shrunk GDP by 1% through damaging the agricultural sector, compounded by the prolonged crisis of the euro zone and setbacks in Hungary's trade partners, which weighed heavily on exports and industrial production.The bigger-than-expected drop in performance is likely to impact monetary policy, where rate-setters will be all the more anxious to continue with a cutting cycle commenced last year, taking the indicator to 5.50% in January from the 7.00% that was in effect since late 2011.
    KSH will publish the detailed GDP figures on March 8.