Better than expected Q1 GDP reported today

HUNGARY - In Brief 18 May 2021 by Istvan Racz

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GDP grew by 1.9% qoq, implying a 1.8% yoy, sda decline in Q1, the former one of the best in Europe (EU: -0.4% qoq), the latter just around the EU average (-1.7% yoy). This is preliminary data, with no details on supply and demand components. The KSH only said this morning that areas of strength were industry, the financial sector and the information and communications sector, which everyone would have guessed anyway.Importantly, this data is positive surprise, as analysts on average expected -0.3% qoq, implying -4% yoy, according to Portfolio.hu's poll, and our own forecast was just one decimal point stronger than this. However, this surprise was partly spoiled by Mr. Virág's statement of yesterday. As we mentioned in our commenting note, the vice governor of the MNB most probably would not have dared to make such an aggressive statement if the Bank had not had a hint of a relatively strong Q1 GDP result.Based on today's GDP report, some domestic analysts and a part of the domestic press have got quite enthusiastic about this year's growth prospects. Some have even got close to the MNB's 6% GDP growth forecast for 2021 (which was originally 4-6%, of course). No doubt, prospects are indeed improving, especially as the Covid infection curve has taken a rather steeply falling trend lately, opening up good chances for an early reopening.Yet we would warn everyone against reading too much into any Q1 GDP data in the first place, but also against becoming excessively positive about domestic reopening. In fact, there is not really much left that can be reopened, except that from May 28, wedding parties will be allowed again. The only big area where there is still much of rest...