Official growth forecast reduced for 2021

HUNGARY - In Brief 05 Nov 2021 by Istvan Racz

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Finance minister Varga announced at a conference yesterday that the government now expects 6.8% real GDP growth for this year, scaled back from the previous 7.3% figure the Ministry predicted just one month ago. Mr. Varga said the lower growth figure was due to the expected negative impact of higher inflation, sharply higher prices of imported gas and the most recent rapid upturn of Covid's domestic 4th wave.At first glance, this looks like a relatively insignificant downward revision, but it is not quite the case. At this point of the year, one can only make such an amendment in view of end-August or end-September actuals, or in the current case most probably also taking into account the Ministry's Weekly Economic Index, which is rarely made public, and to which Mr. Varga did not make any reference yesterday. Our guess is that the slowdown compared to the earlier forecast is expected to affect Q4 results. If this is the case, then quarterly yoy GDP growth is probably expected to come in at 1.7-2% weaker than it was officially expected just last month.By the way, Mr. Varga did not mention a fourth but very important contributing factor, the most recent weakness of car industry output and exports. As reported this morning, industrial output fell by 0.3% mom, 1.6% yoy in September, the yoy change turning negative for the first time since January. The Statistical Office said car industry production breaks, because of the well-known global supply problem, played a key role in this. In Q3, the volume of output rose by 2.1% yoy, which is OK, but not that spectacular any more, and it pulled down the yoy growth in January-September to 13.4% yoy.Meanwhile, retail sales is doing...