Hungary’s second-quarter GDP figure substantially exceeded analysts’ earlier expectations, with many notably improving their forecasts for this year since then. Some estimates suggest an increase of up to 8% for the full year.
Hungary’s second-quarter GDP grew by an annual 17.9 percent, the highest quarterly growth ever recorded, Finance Minister Mihály Varga announced in a video on Facebook on Tuesday.
Varga said that the fresh data shows the economic recovery in Hungary is moving forward at a pace that is “among the fastest in the European Union.”
He said the structure of growth is “healthy” and extends to “a broad range of economic sectors.” Pandemic-related government measures to aid the recovery could contribute 8.4 percentage points to economic growth this year, he said.
The data surprised most analysts, as the economy has been growing even faster than previously expected.
The momentum of economic growth this year is particularly important, because Viktor Orbán previously tied a 2021 personal income tax rebate for families with children to be paid back in 2022 if the annual growth reaches at least 5.5%.
The Hungarian economy’s performance in the second quarter (seasonally and calendar adjusted) was 2.7% better than the first quarter. Analysts had previously expected the economy to expand by 2% quarter-on-quarter and 17.2% year-on-year, compared with the actually achieved 17.9%.
As a result of the newly released data, Takarékbank raised its GDP growth for this year from 7.7 percent to around 8%, while K&H Bank raised its forecast from 6.7 percent to above 7%.
Takarékbank chief analyst, Gergely Suppan, said full-year GDP growth could reach 6.8 percent this year even if growth stagnates in the second half.
Dávid Németh, K+H Bank senior analyst, said the lender is raising their projection for full-year growth from 6.7 percent to “over 7 percent” in light of the Q2 data, but noted the downside risk of the global impact of further pandemic waves caused by Covid variants.
Gábor Regős of pro-government Századvég said the surprising thing about the GDP data released on Tuesday is that both annual and quarterly growth have exceeded expectations. In fact, the economy’s performance has already reached the level of the fourth quarter of 2019, meaning that at the macro level, the economy has already emerged from the crisis.
According to Regős, this year’s growth could be higher than previously estimated, exceeding 7 percent, or even 8 percent in a favorable scenario.
The prime minister’s advisor on economic policy expressed similar views after the release of the preliminary Q2 GDP data. Márton Nagy said in a radio interview that Hungary’s full-year economic growth could be “around 7 percent” in 2021.
Nagy told Kossuth Radio that the Q2 GDP data puts Hungary among “frontrunners” of economic recovery alongside Sweden, Poland, and Romania.
He noted that factories that shut down in the base period were operating at full capacity in Q2, while the catering and commercial accommodations industry re-opened and consumption rebounded. Construction, retail, and service sectors were also strong. He acknowledged the downside risk of further pandemic waves, but said restrictions would probably be on a smaller scale, pointing to Israel as an example where recent restrictions were laxer than earlier in spite of the marked presence of the delta variant.
Nagy noted that it could be said “with a high degree of certainty” that growth would reach the 5.5 percent threshold, triggering a personal income tax rebate for families with children.
Featured photo illustration by Tamás Vasvári/MTI