Preliminary Q1 GDP came at 8% yoy and (working day and seasonally adjusted) and 2.1% qoq. This is above market consensus and our estimate (7.4% and 7% respectively). According to the statistical office, growth was registered everywhere in the economy, but especially industry and market services could contribute to growth. The strong start of the year was not unexpected as the growth momentum was particularly strong in the previous quarters. Moreover, in the pre-election months, the government provided generous income transfers to households (13th month pension, minimum wage increase, tax rebate for families etc.). It is also worthwhile to mention that in Q1 2021 covid lockdowns were still effective, providing a low base to compare. Nevertheless, going forward, the robust growth performance of the Hungarian economy is challenged from various directions.
Having sketched up the above challenges the Hungarian economy is facing in the rest of the year, we believe that growth will swiftly decelerate. We expect quarterly growth rates to come already in the negative territory from Q2 on (therefore we forecast technical recession) and calculate with a negative yoy GDP reading for Q4. Despite the marginally better than expected Q1 GDP data, we keep our 2.5% growth forecast for 2022 and 2% for 2023. This is our baseline scenario, and we admit that in case the biggest danger (i.e. energy crisis) can be avoided, the Hungarian economy may deliver around 4% GDP growth this year.
Zoltán Török is the Head of Research at Raiffeisen Bank Hungary. He joined Raiffeisen in 1997 as a macroeconomic analyst, later became the chief economist at Raiffeisen Securities and Investment and holds his current position since 2004. His main focus is on the Hungarian macroeconomy and the banking sector. He got his M.A. degree from the Central European University and his PhD from Budapest Corvinus University. He is a frequent speaker at conferences, an Op-Ed columnist in major professional sites in Hungary and teaches a university course on international finance. In his spare time, he enjoys various outdoor activities (running, cycling, hiking).
While the US Fed delivered on expectations last week, ECB members tried to guide markets on further monetary policy. In Poland and Czechia rates were raised by 75bp. Next week it's time for hikes in Romania and Serbia. Upcoming CPI data should confirm ongoing inflation pressures.