Q4 GDP and December BOP data: no good, not bad

HUNGARY - In Brief 14 Feb 2023 by Istvan Racz

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Q4 GDP growth as reported this morning at -0.4% qoq, 0.9% yoy, following the downwardly revised -0.7% qoq, 3.7% yoy data for Q3. This means that the economy is now in the state of a technical recession, just as expected, despite the fact that the full-year growth rate was still 4.6%, because of the excellent performance recorded in previous quarters. Source: KSH, own forecast for 2023 This looks poor at first glance, but the good side of the GDP report is that the recession seems to be quite shallow for now, most probably because of robust industrial output in Q4, related to cars and electric batteries. We predicted -2% qoq, whereas Portfolio.hu's analyst poll expected -1.2% qoq, the latter strictly following a rather specific hint on the number, given publicly by cabinet minister Gulyás a few days ago. The other important dataset for today was the MNB's preliminary data on the December BOP. This was also good and bad at the same time. The good news is that in December, the merchandise trade deficit shrank markedly, probably on reduced volumes of gas imported at decreasing prices. So, the December current account deficit was only 4.9% of GDP in annualised terms. But there was bad news as well. Q4 together was just awful from the point of view of the current account gap and the external financing balance, with 9.7% of GDP and 15.9% (!) of GDP, respectively. The first one was obviously linked to big and expensive gas purchases in October and November. The second one was due to a very big errors and omissions deficit. This item is usually quite big in preliminary numbers towards end-year, but not quite as big as now: 7.5% of GDP. One can only hope that the latter figure w...