After declining for eight quarters, domestic demand strengthened in the past quarter. Having reversed a downward trend prevalent for four years, investment volume growth added 0.8 percentage points to economic expansion. In comparison to the previous quarter, each component – such as household consumption, government spending, investment as well as exports and imports -- increased. Under previous governments, Hungary (along with Greece) was the worst performing country in the respective ranking of the European Union. Currently, however, in light of available data Hungary is again among the countries with the largest year-on-year growth rates.

According to the latest report of the Hungarian Central Statistical Office (KSH), in the second of quarter of 2013 Hungary’s GDP – in line with prior estimates – was up by 0.5 percent in comparison to the previous quarter. The increase was mainly attributable to an improvement of 17.2 percent and 6.9 percent regarding agricultural and construction sector output, respectively. Compared to the corresponding period of the previous year, even unadjusted data shows growth of 0.5 percent, while statistics adjusted for seasonal and calendar effects signal a GDP growth of 0.1 percent.

Compared to the previous quarter, seasonal and calendar effect adjusted data also indicate that Hungary’s GDP was up by 0.1 percent. Concerning the output side, within the national economy the construction sector contributed positively to growth (by 0.2 percentage points); several EU-funded infrastructure development projects played a key role in the increase of construction sector output. After last year’s crop failure due to unfavourable weather conditions, this year the agricultural sector was a significant contributor to growth (0.5 percentage points).

The services sector, after having contracted for more than one year, added 0.1 percentage point to growth, which signals a modest improvement of domestic demand. In spite of positive estimates based on monthly industrial output data, this sector’s year-on-year performance continued to be a negative contributor (by -0.2 percent points.) As far as the consumption side is concerned, domestic demand was stronger after it had declined for eight quarters. Both household spending (0.2 percentage points) and government spending (0.1 percentage point) boosted GDP growth.

Having reversed a downward trend that had existed for four years, investment volume growth added 0.8 percentage points to economic expansion. Infrastructure projects financed by EU funds contributed substantially to the outstanding achievement, and as a promising sign machinery and equipment investment was also up. In the observed period, the contribution of net exports turned significantly negative (-1.2 percentage points).

A similarly inauspicious figure was last seen in Q2 2008. The growth of imports, the pace of which exceeded that of exports, is believed to be the result of improved domestic demand on the one hand and of the inventory growth preceding the external demand upturn expected for the second quarter, on the other. The positive contribution (by 0.5 percentage points) of inventories to GDP growth underpins this expectation, along with the anticipated increasingly remarkable performance of the agricultural sector. Compared to the previous quarter, each component – such as household consumption, government spending, investment as well as exports and imports – increased.

The two tables below show GDP growth indices regarding the output and consumption sides for the second quarter of 2013 (corresponding period of the previous year=100, %):

According to the Eurostat flash report, in the second quarter of 2013 GDP increased by 0.3 percent both in the Eurozone and the EU 27 compared to the previous quarter. Year-on-year, economies contracted by 0.7 percent and 0.2 percent in the Eurozone and the EU, respectively. Under previous governments, Hungary (along with Greece) was the worst performing country in the ranking of the European Union. Currently, however, in light of available data Hungary is again among the countries with the largest year-on-year growth rates.

(Ministry for National Economy)