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Hungarian economy: sensing some optimism

The Hungarian economy has once again emerged from stagnation, as evidenced by the flash GDP data for the first quarter of 2024. The growth rate of 0.8% quarter-on-quarter, adjusted for seasonal and calendar effects, resulted in a 1.1% year-on-year economic activity.


However, experts are still waiting for the detailed GDP report due on 4 June to see the exact structure of growth. The Hungarian Central Statistical Office (HCSO) has adopted a new methodology, meaning that the margin of error for revisions compared to the flash estimate could be around +/– 0.2ppt. In our view – based on the latest high-frequency indicators for construction, industry, and fiscal developments – we see a minor downside risk to this year's first quarter GDP review. However, the recent flow of labour market data points to a better growth outlook for the rest of the year, so analysts see the risks tilted to the upside when it comes to our current 2024 GDP growth forecast of 2.2%.

Retail sales end the first quarter on a high note
Retail sales volumes rose by 2% MoM in March, bringing the YoY figure to 4.2% on a calendar-adjusted basis. This remarkable performance was reflected across the board as retail volumes expanded in all sectors. However, the March report raises a number of questions as the performance of the retail sector in the first two months of this year has been quite sluggish. Against this backdrop, experts believe that the March data should be taken with a pinch of salt, as this exceptional outperformance is not reflected in other economic indicators. In this respect, VAT revenues (which are closely linked to sales volumes) didn't perform as well, improving by only 2.8% YoY. Nevertheless, the strong dynamics of wage outflows may have boosted savings rather than consumption.

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