GDP growth figures for Q4 2017 the highest in thirteen years

HUNGARY - In Brief 06 Mar 2018 by Istvan Racz

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There was essentially no surprise coming out of the detailed GDP numbers for Q4 2017, reported this morning. Yet the details were interesting.First, the 1.3% qoq, 4.9% yoy growth rates for Q4 (the yoy number revised marginally upwards from the first estimate) was quite outstanding for Hungary by historical standards. Indeed, the yoy number was the highest reported since Q3 2004. Second, the annual growth rate for 2017 landed at 4.2% sda (4% on unadjusted basis), which was also the highest on record since 2005.Regarding demand components, annual growth was driven both by private consumption (with a contribution of 2.5 pps) and fixed investment (3.2 pps), the excess over the total growth being consumed by a moderately deteriorating trade balance. On the supply side, services contributed by 1.8 pps, industry by 1 pp, and construction output also added 1pp. This means that growth was rather broad-based on both sides in 2017.Especially remarkable was the continuous build-up of private consumption growth throughout 2017, to 5% yoy in Q4. Apparently, the gap between the growth rates of consumption and real income was narrowing, which typically marks increasing consumer confidence.Of course, the most recent rapid pace of GDP growth will not be sustainable for long. Over the next few years, growth is likely to decelerate, moving towards its much lower potential rate. However, this is likely to be a slow multi-year process, rather than a sudden collapse. On this and other details, please, see the following table: GDP Growth by Main Components*/ Seasonally and day-adjusted and balancedSources: KSH, own estimates and forecast