According to preliminary data, in the second quarter of 2016 Hungary’s GDP grew by 2.6 percent, well above market expectations.

These data clearly show that the weak reading of the first quarter was a result of one-off factors, as in the period April-June almost each sector performed well. In the first half of the year, the economy thus expanded by 1.7 percent.

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The structure of growth was balanced in the second quarter, as practically every sector contributed to the expansion. Thanks mainly to motor vehicle manufacturers and producers of electric goods, the industrial sector strengthened again. Preliminary data from the agricultural sector indicate that output was higher than in the same period of the previous year, as yields on both harvested and still un-harvested crops appear favourable. Due to wage hikes, the services sector could also post growth. As one of the effects of higher wages, the volume of retail sales gained some 6 percent in the second quarter.

On the demand side, consumption and net exports have both bolstered growth. Besides wage hikes, consumption was also fuelled by subdued inflation and favourable employment trends. For example, in Q2 the number of people in employment grew by some 140 thousand year-on-year. Hungary’s foreign trade surplus soared to EUR 5.3bn in the first half of the year, up by some EUR 1bn compared to the high base one year ago.

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In the second half of 2016, GDP growth may accelerate, as a result of the Government’s housing programme, the performance of the agricultural sector and growing consumption. The disbursement of EU grants has also picked up in the second quarter, which amounts will be utilized in the second half, boosting – for example – the construction sector. Expansion is seen as sustainable, as both external and internal balance indicators have improved recently.

Accordingly, the Government’s prognosis of 2.5 percent of GDP growth for 2016 continues to be a realistic prediction.

(Ministry for National Economy)