2.2 percent growth in the first quarter


The Hungarian economy could feel the effect of the coronavirus pandemic already in Q1 2020; the greater impact came, however, only in the end of the quarter. As a result, the Hungarian Central Statistical Office could measure a 2.2% year-on-year growth; the quarter-on-previous-quarter figure showed, however, a 0.4% drop in economic output.


On the production side, the added value generated by agriculture was 0.6% lower than one year before; that of the industry was, however, 1.7% higher, that of the construction industry was 3.0% higher, and that of services was 2.4% higher. These four sectors contributed to the growth of the economy with 0.0 percentage points, 0.4 percentage points, 0.1 percentage points, and 1.2 percentage points, respectively.

On the consumption side, the economy was still driven by household consumption, with a volume 5.0% higher than one year before, contributing with 2.4 percentage points to the growth of the economy. Investments dropped by 2.6%, which slowed growth by 0.6 percentage points. Exports fell by 0.5%, but imports increased by 1.3%—as a result, the foreign trade balance slowed growth by 1.6 percentage points.

In April, the coronavirus made itself strongly felt in the Hungarian economy. Industrial output fell by 36.8%, primarily because of the disruption of supply chains. In April, the coronavirus did not make itself that strongly felt in the construction industry, the output of which was 2.1% less than one year before. The lockdowns and the partial closing of retail outlets caused a 10.2% drop in retail sales.

We expect that the economic output would fell by 3.1% in 2020 (relative to 2019), and 2021 could see a 5.1% bounce-back. In the meantime, the inflation rate could be 3.2% in 2020 and 3.7% in 2021.

 

Please find the full report here.