The numbers are still good, but the recession is already knocking on Hungary’s door
Papp Zsolt;
GDP; recession; industrial production; Hungary;
2022-08-13 06:30:00
In the second quarter, the Hungarian economy grew by more than six percent, but according to the data, a significant slowdown is coming in the coming months.
The CSO will announce the second quarter GDP data in the middle of next week, and according to analysts speaking to Népszava, although the annual growth will still be above one hundred percent, the growth of the Hungarian economy will eventually slow down in the third and fourth quarters, or very easily even go into recession.
Among the GDP components, industrial production exceeded the level of the previous year by 1.5 more in June, and more precisely, if we look at the indicator adjusted for the number of different working days, production increased by 4.8. The expansion was driven by a 2.9 percent increase in the automotive industry, a 4.9 percent increase in the electronics industry, and a 9.3 percent increase in the food industry. The slowdown was already felt in the majority of sectors, although a strong rebound is expected in the vehicle industry in the coming months, as the chip shortage seems to be resolved and the base will be low due to last year’s factory shutdowns. It is also clear that the automotive industry is well supplied with additional orders – Gergely Suppan, the lead analyst at Magyar Bankholdind, told Népszava.
At the same time, looking at the overall picture, the future of the Hungarian economy is getting darker and darker. According to Gergely Suppan, the quarterly growth in the second quarter was an additional 0.5 percent, that is, we remained in the positive range, but the GDP growth rate has already slowed down. This means that, on an annual basis, the Hungarian economy grew by 6.2% in the second quarter, after 8.2% in the first quarter.
A slowdown can be measured in many sectors, the performance of agriculture is decreasing, the growth of industry and the construction industry has slowed down, which was offset by the increase in residential consumption and tourism. In the coming months, a slowdown is inevitable, as consumption decreases due to the increase in utility costs, both the population and companies begin very serious energy-saving investments, which can curb the decline. According to Gergely Suppan, growth will thus remain in the positive range even in the third quarter, the watershed may be the last months of the year and the first quarter of 2023. Now we expect a positive zero percent growth for the period after October, – but the situation is very flexible, it is not yet known whether there will be a shortage of fuel and/or housing in Europe, because this would fundamentally rewrite the macroeconomic trajectory – said Suppan.
Péter Virovácz told our newspaper. The senior analyst of ING Bank sees the situation of the Hungarian economy more pessimistically than his colleague, to the extent that on a quarterly basis he expects a drop in GDP in the third quarter as well. Despite this, the full-year growth in 2022 will be between 4-5 percent, because the growth in the first half of the year was so full, he added. The analyst expects a 0.4 percent growth on a quarterly basis for the second quarter, with upside risks, which represents a 6.1 percent growth related to the second quarter of the previous year.
The analyst expects a decline in the third quarter – so the Hungarian economy could sink into a technical recession by the second half of the year, he said. There are more and more warning signs: the growth of retail sales slowed in the following three months, the last example of which was in 2008-2010, when the Hungarian economy suffered a serious downturn. It is also a warning sign that consumer confidence has fallen to the level of 2012 – this was the year when the GDP of this country was reduced for the last time. Industrial data from June indicate that orders will begin to shrink, and if it becomes permanent, it will also slow down growth.
and the rising interest rate environment, the rise in utility prices, and it seems that the fuel price stop is less and less sustainable – Péter Virovácz listed the domestic economic problems. The deteriorating external environment further increases uncertainty, but since the disposable income of the population and the resources of companies are decreasing, the Hungarian economy will already shrink in the second half of the year. Due to the first half of the year, the annual growth will be so good that it can be printed on posters, according to the analyst, it will remain between 4-5 percent. The high growth figure hides the real processes and problems, the annual GDP data will only reflect the reality in 2023, added the analyst.