In Q2 2014, Hungary’s GDP was up by 3.9 percent in comparison to the corresponding period of the previous year, the Hungarian Central Statistical Office (KSH) reported on the basis of preliminary data. This has been the highest quarterly GDP growth figure since Q1 2016. Compared to Q1 2014, GDP increased by 0.8 percent.

This growth is unprecedented even from an EU perspective. The Hungarian economy has been beating the growth forecasts of 2-2.3 percent formerly prognosticated by international institutions (European Commission, IMF).

The larger-than-expected GDP growth figure is thought to be the result of the stable and dynamic performance of productive sectors as well as the rebound of domestic demand. Industrial output jumped by some 10 percent, while growth within the construction sector exceeded 20 percent. Industrial output volume indices have repeatedly shown growth of around or more than 10 percent.  Among the EU member states, in June 2014 Hungary’s industrial output growth was the largest (11.3 percent), higher than that of Romania (9.9 percent), the Czech Republic (5.6 percent), Poland (1.7 percent) or Slovakia (7.5 percent). The Hungarian economy has been on a growth path since the second quarter of 2013.

Further expansion is also expected regarding the services sector: improved consumption is set to drive retail sales, favourable tourism data are seen to fuel the hospitality sector and industrial output growth is believed to underpin the transport division.

On the consumption side, domestic demand growth was the key contributor to the surge in GDP. This positive trend has been underpinned by EU resources, low interest rates, the Funding for Growth Scheme and the surge of the private sector’s economic activity. Higher consumer confidence indices and growth within the retail sector have been indicating an upturn of household consumption. This development has been the result of moderate inflation, employment growth and the increase of wages in real terms. These facts show that expansion has been based on a sounder and more balanced economic structure.

In light of confidence indices, data on the stock of orders and new contracts, housing permits and consumer expectations, momentum is expected to remain steady and GDP growth for the year 2014 is likely to exceed 3 percent, above the figure prognosticated in the latest Convergence Programme.

Detailed GDP data will be published by KSH on 3 September 2014.

(Ministry for National Economy)