Hungary’s economy grew by an annual 2.2% in the first quarter, the Central Statistical Office (KSH) said. Growth slowed from 4.5% in Q4 2019. Annual growth in Q1 2019 was 5.3% and 4.9% in the full year. While the coronavirus crisis had a negative impact on most economic sectors, market-based services and, to a lesser extent, industry remained the engines of growth, KSH said. Calendar year-adjusted data show GDP grew by 1.8% in the first quarter compared with 4.5% in the last quarter of 2019. Adjusted for seasonal and calendar-year effects, GDP grew by an annual 2% in Q1, down from 4.4% in Q4. Quarter-on-quarter, GDP eased by 0.4% in Q1 compared with growth of 0.7% in Q4, adjusted for seasonal and calendar-year effects. Hungary’s updated Convergence Programme assumes the economy will shrink by 3% this year.
Commenting on the data, Finance Minister Mihály Varga said that though the coronavirus epidemic had fundamentally rewritten economic expectations, Hungary’s 2.2% growth rate had exceeded the European Union average by nearly 5 percentage points. Prior to the coronavirus outbreak, Hungary was one of the EU’s fastest-growing economies. In the meantime, the government has been pursuing a disciplined fiscal policy and ensuring the public debt shrinks, Varga said. The crisis is expected to peak in the April indicators, he said, adding, at the same time, that the “unprecedented” relief package introduced by the government would help the economy rebound in the second half of the year. The government has introduced targeted measures to protect the economy aimed at saving businesses, preserving jobs and supporting families, he said. The measures could help contribute 3.7% of GDP growth, thereby allowing the country to avoid a repeat of the recession seen at the time of the 2008-2009 financial crisis, Varga added. He said a contraction of 3% of GDP projected for this year could be followed by a growth rate of 4.8% in 2021.
Takarékbank analyst Gergely Suppan said the better-than-expected performance of the Hungarian economy was thanks to outstandingly high performance at the start of the year and the fact that Hungary had introduced fewer strict measures against the epidemic than some other countries.
Századvég Economic Research institute’s Gábor Regős said the novel coronavirus had caused less damage than expected because of the better-than-projected economic performance in the first quarter. ING Bank senior analyst Péter Virovácz said ING had projected 3.3% economic contraction for the whole of the year. He the statistical office was likely to have to make some revisions to its data. And since the Q1 figure is worse than originally projected, there are negative risks to the annual projection, he added.