GDP fell by more than expected in Q2, but our latest 2020 forecast is still standing

HUNGARY - In Brief 14 Aug 2020 by Istvan Racz
According to preliminary data, GDP fell by 13.5% yoy on sda basis in Q2. The MNB expected -7%, the Finance Ministry predicted -9.9%, the analyst consensus was -10.5 and -10.7% in two different polls, and our forecast, published in July, was -12%. A week ago, Eurostat estimated Euro Area Q2 GDP growth at -15% yoy and for the EU at -14.4% yoy, so Hungary did just slightly better than that.In qoq terms, GDP shrank by 14.5% in Q2 (we expected -13%), following a 0.4% decrease in Q1.Importantly from our perspective, these results have left our -6% annual growth forecast for this year's GDP standing. As the reader might recall, this forecast was based on the assumption of a really big setback in Q2, followed by a slow recovery in the rest of the year. Lately, Finance Minister Varga admitted that the government's earlier GDP forecast of -3% for this year, on which the 2021 government budget was based, now looks optimistic, and a 5% drop for the year as a whole seems to be more realistic.All GDP figures reported today are preliminary. The second reading of national accounts data, included currently unavailable details, will be reported on September 1 only.

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