Hungary’s GDP grew by an annual 2.2 percent in the first quarter, the Central Statistical Office (KSH) said in a first reading of data on Friday.
Growth slowed from 4.5 percent in Q4 2019. Annual growth in Q1 2019 was 5.3 percent and 4.9 percent 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 percent in the first quarter compared with 4.5 percent in the last quarter of 2019.
Adjusted for seasonal and calendar-year effects, GDP grew by an annual 2 percent in Q1, down from 4.4 percent in Q4.
Quarter-on-quarter, GDP eased by 0.4 percent in Q1 compared with growth of 0.7 percent in Q4, adjusted for seasonal and calendar-year effects.
Hungary’s updated Convergence Programme assumes the economy will shrink by 3 percent this year.
Finance Minister: growth exceeds EU average
Commenting on the data, Finance Minister Mihály Varga said that though the coronavirus epidemic had fundamentally rewritten economic expectations, Hungary’s 2.2 percent 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 percent 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 percent of GDP projected for this year could be followed by a growth rate of 4.8 percent in 2021.
Analysts: better than expected
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.
Pro-Fidesz 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.
Meanwhile, ING Bank senior analyst Péter Virovácz said ING had projected 3.3 percent 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.
Featured photo illustration by Sándor Ujvári/MTI