Budapest, August 12 (MTI) – Hungary’s GDP rose by an annual 2.6 percent in the second quarter, accelerating from 0.9 percent growth in the first quarter, the Central Statistical Office (KSH) said in a first reading of data released on Friday.
KSH said market services, industry and the farming sector contributed the most to the increase. Construction sector output continued to weigh on growth, it added.
Adjusted for calendar year effects, GDP in the second quarter climbed by an annual 2.2 percent, picking up from 0.8 percent in January-March.
Adjusted for both calendar year and seasonal effects, the growth rate came to 1.7 percent.
In a quarter-on-quarter comparison, GDP climbed a calendar year- and seasonally-adjusted 1.1 percent in Q2 after contracting 0.7 percent in Q1.
Speaking at a press conference after the data was released, Economy Minister Mihály Varga said growth had “returned to normal” in Q2 after a temporary slowdown in Q1. Headline growth exceeded the ministry’s own expectations, he added.
Growth in the second half of the year will be supported by a pickup in home construction spurred by the government’s expanded subsidy scheme, higher wages, an acceleration in the absorption of European Union funding and a strong performance in the farm sector, Varga said. The government is standing by its target for full-year GDP growth of 2.5 percent, he added.
Péter Virovácz of ING Bank said that based on the fresh data average GDP growth for the year could be higher than the 2.2 percent predicted earlier. However to reach the 2.5 percent GDP growth target set by the government domestic output would need to rise by an outstanding 3.2 percent on average in the second half of the year.
CIB Bank said they will likely revise their growth forecast for the year once detailed GDP data are available. Based on the first reading of quarterly data, GDP growth for the year could be modestly above 2 percent.
Erste Bank chief analyst Gergely Ürmössy said he would stick with his prediction of 2 percent annual GDP growth for 2016 until the second reading of quarterly data, but at present it looks like if the German economy can perform well then it will also give a boost to the Hungarian one.
The opposition Socialist Party, however, said that Varga’s figures are “worth nothing” and that people would rather see a payrise instead.
Nándor Gúr, deputy chair of the Socialist Party, told a press conference that “people cannot feed on figures or buy textbooks out of them” for the next schoolyear. “What people see is larger amounts on price tags and that their wages are worth less”, Gúr insisted. He also argued that if the Hungarian economy were in fact growing, “600,000 people would not have left the country but hundreds of thousands from other European countries would have sought jobs here”.
Economic research institute Századvég said the growth rate exceeded expectations, indicating that the slower Q1 growth rate was just a blip. Szazadveg noted that the Q2 growth rate was higher than both its own prediction of a 2.5 percent growth rate and the 2.1 percent rate forecast by most analysts.
Although KSH did not break down the data sector by sector in its preliminary report, Századvég said the main drivers of growth in the second quarter were the agriculture sector, industry and the services sector. The think-tank said that the weaker construction output and the slower drawdown of European Union funding had held back growth in Q2.
Consumption and the trade surplus also contributed to the growth rate while a drop in investments held it back, Századvég said. Household consumption was encouraged by favourable labour market conditions such as the lower unemployment rate, rising wages and a lower personal income tax rate, Szazadveg said. The trade surplus can be explained by the rise in industrial output, the think-tank added.