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Internal demand likely to stay strong driver of Hungarian GDP growth in 2019, economy to grow 4.5 pct

In the first quarter of 2019, the Hungarian economy had grown 5.3 percent on a year-on-year basis. Household consumption and gross fixed capital formation rose 4.8 percent and 23.4 percent year-on-year, respectively.

Net exports contributed positively to the GDP growth (1.3 percentage points), while inventories subtracted from the GDP growth. On the production side, construction and services continued to be significant contributors to the growth, rising 46.7 percent and 3.8 percent year-on-year, respectively. In the meantime, the performance of industry rebounded, increasing 5.9 percent year-on-year.

According to an Erste Group Research report, the GDP is likely to grow 4.5 percent year-on-year in the whole of 2019. Household consumption might be a bit stronger than in 2018, underpinned by hefty wage rises and solid lending activity of the banking sector.

Investments are unlikely to decelerate strongly, owing to some previously announced large investment projects, ubiquitous construction output and remaining investment activity of the state.

“The contribution of net exports is expected to turn negative again, as uncertainties surrounding export prospects increased, due to intensified trade conflicts, while strong internal demand should attract high imports. Thus, the positive contribution of net exports in 1Q19 could have been a one-off phenomenon”, added Erste Group Research.

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