Hungary GDP grows 4.2 pc, budget posts 698 million euros end-May deficit
Hungary’s cash-flow-based budget, excluding local councils, ran a 213.4 billion forint (EUR 698m) deficit at the end of May, the Economy Ministry said on Wednesday. Hungary’s GDP grew by an unadjusted 4.2 percent year on year in the first quarter, the Central Statistical Office (KSH) said in a second reading of the data.
The shortfall was 18.3 percent of the 1,166.4 billion forint full-year target.
The budget position is “very favourable”, with the deficit standing at only 18 percent of the annual plan as against the time-proportionate 42 percent, economy ministry state secretary Péter Banai Benő said. Thanks to the increase in the number of jobholders and the growth in real wages, several revenue items are higher than originally planned, he told public television. Personal income tax revenues were 65 billion forints more than last year despite an increase in available tax allowances. Other employment-related tax revenues and VAT revenues were also up, he said.
On spending side, the state spent 29 billion forints more on home creation subsidies than in the same period last year, he added.
Hungary GDP grows 4.2 pc yr/yr in Q1
The growth was lifted by services, industry and construction, the latter two growing from a low base. Agriculture, however, dropped from a high base and cut growth by 0.2 percentage points.
KSH revised the unadjusted figure up from 4.1 percent in the first reading released on May 16.
In a quarter-on-quarter comparison, GDP was up an adjusted 1.3 percent in the first quarter, the same as in the first reading.
In a statement, the economy ministry said that the 4.2 percent growth figure was the second highest in the past 10 years. Hungary’s economy is on a “steady and balanced path”, it said, adding that the government’s measures to boost competitiveness taken in the spring, including tax cuts and wage agreements with unions, could further support growth in the long run. It is “extremely important” that the government “protect Hungary’s independence in terms of economic, tax, and employment policy,” the ministry said.
The high growth figure was mostly supported by investments, the statement said, adding that home construction expanded by some 50 percent, thanks to a government scheme to help young couples buying their first home. Companies were also able to invest in capacity-boosting projects, it said, partly attributing this to the government’s decision to cut the corporate tax to 9 percent.
Meanwhile, industrial output in Hungary fell by an annual 3 percent in April, slowing from a 13.4 percent increase in March, preliminary data by the Central Statistical Office on Wednesday showed.
Output increased 2.5 percent adjusted for the number of working during the period. KSH said that the difference between the adjusted and the main figure was because there were three less workdays in 2017 than the year before.
In a month-on-month comparison, industrial output fell by 0.8 percent after rising 0.7 percent in March, adjusted for seasonal and workday effects.
Commenting on the industrial output data, Takarékbank analyst Gergely Suppán said last year’s low base and the introduction of new production capacities in food processing, the rubber industry and car battery production may boost industrial output growth this year to as high as 6 percent. He expected an even faster increase next year when major new car industry capacities are introduced by Audi and Mercedes.
ING Bank analyst Péter Virovácz said April’s data was below expectations but the outlook for this year was favourable, with growth pulled by more industries than just car manufacturing. Industry could expand at an average 4 percent this year, higher than last year, he added.
K and H Bank senior analyst Dávid Németh said it was uncertain whether industrial growth of almost 8 percent in the first quarter could be maintained, and currently a lower figure of 5-6 percent was likely for the whole year. Despite April data appearing to be weak at first sight, he said the drop would not be long-term and production would once again kick off in May, he added.