Hungarian economic growth likely to be driven by robust internal demand

The Hungarian economic growth in the third quarter was upwardly revised to 3.9 percent from the flash estimate of 3.6 percent. But the underlying developments showed no new information. Household consumption and gross capital formation mainly drove the headline figures, rising 4.8 percent year-on-year and 20.3 percent year-on-year, respectively.

In the meantime, net exports negatively contributed 3.2 percentage points to the GDP growth, as the annual pace of import growth reached 9.3 percent, above the exports pace of 4.5 percent year-on-year. On the production front, industry, services and construction mainly drove the economic growth, while agriculture continued to weigh on the growth.

In the FY2017, the Hungarian economy is expected to have grown 3.9 percent year-on-year, noted Erste Group Research. Household consumption is likely to be helped next year by tight labor market conditions and sustained rising net real wages, while the rebound in investments should also continue in the quarters ahead, owing to the rising utilization of EU funds. The contribution of net exports to the GDP growth might remain negative, as rebounding consumption and investments raise import bills.

“Our estimate for 2018 growth is 3.5 percent. Potential fiscal loosening before the elections and the central bank’s asset purchase program starting in January pose upside risks to our 2018 forecast”, added Erste Group Research.

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