Hungarian economy likely grew 2.9 pct in Q1, expected to expand 3 pct in 2017 - Barclays

The Hungarian economy is expected to have expanded in the first quarter of this year. According to a Barclays research report, the real GDP of Hungary is likely to have grown 2.9 percent. Construction output for the first quarter expanded 22 percent year-on-year and indicates towards robust first quarter investment, possibly due to a rebound in EU funds.

Earlier, it was expected that EU-funded investment would increase in the second half of this year; however, construction data shows that this has already begun.

“We therefore revise the quarterly profile of our growth forecast by moving investment forward and now expect real GDP growth of 2.9% y/y in Q1 2017, significantly up from 1.9% y/y previously”, added Barclays.

Meanwhile, the economic growth is now likely to slow down in the fourth quarter to 2.9 percent year-on-year, as compared with the previous forecast of 4 percent year-on-year. The growth momentum is expected to be sustained throughout the year. The Hungarian economy is likely to expand 3 percent for the whole of 2017, stated Barclays.

Meanwhile, the headline inflation in the nation had decelerated to 2.2 percent year-on-year from March’s print of 2.7 percent. The slowdown was mainly driven by deceleration in food and fuel inflation. However, Hungary seems to be running out of labor as the jobless rate is over 4 percentage points below the OECD’s estimate of the natural rate of unemployment. This shows that the nation might face considerable labor shortages that would lead to significant wage pressure.

“We now expect inflation to rise more gradually and finish the year slightly below the 3 percent target, rising above target in 2018”, added Barclays.