A senior economist has highlighted how Hungary’s economy started 2018 exactly where it left it last year - booming!
According to ING, Hungary’s growth is steady but is becoming slightly imbalanced as consumption is responsible for an increasing slice of the growth
The Hungarian Central Statistical Office (HCSO) has left the 4.4 percent year on year advance reading unchanged, which has left no surprises. Senior analyst Péter Virovácz said the details are also roughly in line with expectations, as domestic demand remains the main driver.
On the production side, ING highlighted the significant and increasing contribution of services, making the growth structure more and more imbalanced. Services provided a 2.6ppt contribution to GDP growth - the strongest figure since 2013.
Information and communication, trade and accommodation as well as food service activities also played a leading role. The former sector could benefit from digitalization led by labor shortage, while the latter is thriving on the improvement of households’ income position.
Construction slowed down to 22.5 percent year-on-year in the first quarter of the year due to the high base but was still mainly driven by the drawdown of EU funds, thus infrastructural projects.
Virovácz says the increase of value added in industry underperformed the average growth of 2017, marking a 2.0 percent year-on-year activity, one of the weakest starts in the last few years. The contribution of the industry and construction to the GDP growth was only 1.0ppt, in a fifty-fifty proportion between the two sectors. Agriculture has started this year in relatively good shape, posting a 0.6 percent YoY decrease in added value, he adds.
He concluded that due to the small weight, the effect of the sector remained neutral. The contribution of net taxes on products reached a remarkable 0.7ppt. ING states that as this is the income of the government, we see this as a sign of the increasing extra revenue due to the combination of two things: (1) strong economic performance and (2) the retreat of the shadow economy.