A follow up to our monthly report: GDP and Moody's

HUNGARY - In Brief 03 Sep 2023 by Istvan Racz

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Detailed GDP data for Q2 data was published and Moody's sovereign rating review took place on September 1, Friday. Two days earlier, we said in our monthly report that Moody's might move Hungary to Negative from Stable outlook, both attached to a Baa2 rating. We also said the Q2 GDP data may have been depressed by KSH's accounting on agriculture, the same way as it was boosted by agricultural figures in Q1. Actually, Moody's left Hungary's rating unchanged on Friday. Thus, Hungary continues to have a split rating from the top three agencies, with BBB/Negative from Fitch Ratings and BBB-/Stable from S&P. In the rest of 2023, Moody's will not have any more reviews on Hungary, whereas the other two agencies both will have a preset review date in December. Next time, Moody's will review its Hungarian rating most likely at some point in Q1 2024. Regarding GDP, our hypothesis proved partially right and partially wrong. It proved right in the sense that the quarterly growth rate of GDP was indeed made look worse than it actually was by the so far unexplained very big jump by agricultural value added in Q1. Specifically, GDP was reported to have fallen in real terms by 0.6% qoq in Q4, 0.4% in Q1 and 0.3% in Q2. On ex-agriculture basis, however, it dropped by 0.8% qoq in Q4, 1.8% in Q1 and only 0.2% in Q2. So, Q1 was actually very poor from the growth point of view, and Q2 brought about a more stable level of final output once again. But the Q1 hole was cleared away by the KSH coming forward with 70.3% qoq growth by agriculture in that period. However, agriculture only corrected back by 2.3% qoq in Q2, leaving the ex-agriculture quarterly GDP growth figure still slightly negati...