Hungary: The best might be over - ING

At 4.8%, Hungary has posted its highest growth rate since 2004 and the details are full of puzzles, but there are signs Hungary could well be over its peak, according to Peter Virovacz, Senior Economist at ING.

Key Quotes

“The detailed 2Q18 GDP release caused an upside surprise as the Hungarian Central Statistical Office (HCSO) changed the advance reading by 0.2ppt to 4.8% year on year.”

“On the production side, we can see some surprises as the value addition of services increased at a slower pace of 4.3% YoY in the second quarter. Despite the slow down, services provided a 2.3ppt contribution to GDP growth, the highest among all sectors.”

“Taking into consideration the expenditure side, the main drivers behind GDP growth have remained domestic factors.”

“Overall, we saw a slowdown in consumption and investments, but import activity increased significantly, showing a 7.5% YoY growth.”

“In line with the surprisingly strong industrial performance, the export activity also rose by 6.2% YoY. This difference translated into the negative net export contribution.”

“We expect economic activity to slow down in the coming quarters, based on our LeadING HUBE indicators. Moreover, seasonally and calendar adjusted data, both in year-on-year and in quarter-on-quarter terms suggest the slowdown has already started.”

“Slowdown in consumption and retails sales turnover back up this story too. Going forward, we expect significant revisions - correcting the 2017 base and this year’s figures and solving all of the puzzles. Against this backdrop, we are not ready to change our 4.3% YoY forecast in 2018 as a whole.”