Hungary's gross domestic product grew by 0.3% quarter on quarter in the January-March period, according to first estimate figures adjusted seasonally and by calendar impacts, released by the Central Statistics Office (KSH) on Thursday. Year-on-year growth was 1.6%, according to unadjusted data and 0.9%, according to figures adjusted for calendar impacts.
Eszter Gárgyán, Citibank, Budapest
“According to comments from the Statistical Office, strong industrial performance supported growth in 1Q, which in our view is likely to diminish in the coming quarters as external demand from the euro area weakens."
“We expect a moderate drop in public services (health care and education), while construction and services related to household consumption are likely to remain weak, as we only expect a slow and gradual recovery in household consumption based on the recent drop in consumer sentiment."
“Our view is that strong 1Q GDP data reflected the Ministry of Agriculture's estimates of a strong agriculture harvest (this reflects the methodology used by the Statistical Office)."
“According to our estimate, if weather conditions remain favourable total agricultural output growth could be close to 30% this year, which is likely to partly offset weakening external demand. Such an outcome would result in GDP growth above 2% in 2008. Our current full-year GDP growth projection is 1.9%, as we see downside risks to the export outlook."
“In our view is that although consumption is likely to recover only slowly, the inflation outlook is jeopardised by the second-round effects of supply-side shocks. Therefore, monetary policy decision-makers are likely to put more emphasis on underlying inflation trends and the private sector wage outlook than on growth figures."
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