Q1 GDP sightly stronger by second estimate

HUNGARY - In Brief 01 Jun 2021 by Istvan Racz

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Q1 GDP was reported by second estimate this morning. At +2% qoq, -1.6% yoy, on sdab basis, it looks somewhat stronger than the preliminary +1.9% qoq, -1.8% yoy.The composition of Q1 GDP was reported for the first time on this occasion. This showed that domestic demand was much weaker than GDP, with +0.5% qoq, -4.2% yoy. Consequently, GDP's relative strength came from net exports. Indeed, exports (goods and services) grew by a quite orderly 1.6% qoq, 3% yoy, against 0.8% qoq, 1% yoy import growth.Regarding domestic demand, fixed investment fell by 0.6% qoq, 2.4% yoy, not exactly a path of recovery yet. Household consumption rose by 1.3% qoq and fell by 3.2% yoy, which sounds much better, in view of the positive quarterly change.Anyway, these figures seem to substantiate the view that much of the current significant inflationary pressure in the domestic economy is imported or generated through currency depreciation (an informally managed process). Going forward, the authorities will have to remain considerate of the appropriate position of EURHUF, to keep the domestic economy competitive for the period of post-Covid recovery.