Q1 GDP: Nicely robust, but no great surprise

HUNGARY - In Brief 16 May 2017 by Istvan Racz
Q1 GDP, preliminary, came out at +1.3% qoq, +3.7% yoy on sda basis this morning, without any sectorial details being reported for the time being. CEE economies typically did well on the same indicator, as reported by the Eurostat also today: Romania +5.6%, Poland +4.1%, Slovakia +3.1%, Czech Republic +2.9%, all yoy and sda data. CEE/Hungary had strong GDP growth mainly on two factors: (a) growing industrial demand from Western Europe; and (b) a base effect, i.e. the temporary slump of fixed investment and construction output in Q1 2016, given a sharp drop in the availability of EU transfers in that period.Unsurprisingly, the official suggestion is that the Hungarian Q1 GDP number is better than expected, and this view seems to be shared by some market analysts as well. We do not quite agree with this. The government expects 4.1% GDP unadjusted growth for this year, and the actual unadjusted yoy growth figure was exactly the same in Q1. Now, in order for their annual forecast to be achieved, It is just very logical to expect a higher yoy growth rate for Q1, when base period performance was so exceptionally weak. Just as a reminder, GDP fell by 0.3% qoq in Q1 2016, and construction industry value added collapsed by 22.9% qoq in the same period.On these grounds, our annual GDP growth forecast for 2017 remains 3.3%, and we still expect to sleep well tonight.

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