Genuine good news on Q4 GDP

HUNGARY - In Brief 16 Feb 2021 by Istvan Racz

---

In first estimate, real GDP has been reported to have grown by 1.1% qoq and fallen by 4.3% yoy in Q4 2020. Both figures are on seasonally and day-adjusted as well as non-annualized basis.The good news is that this way, GDP fell only by 5.2% in the whole of 2020 in real terms, by significantly less than the 6.4% drop predicted by the Finance Ministry in December. The latter number was the one used as a basis for the estimates underlying the government's revised 6.5% of GDP deficit target for this year, and the stronger-than-expected basis should reinforce the feasibility of the fiscal plan.The Statistical Office has not given away too much on the details yet, as usual in the case of first estimates. But in a brief commenting sentence they said that the strength of the economy in Q4 were the industrial sector and IT and communications, the latter most certainly because of the increased demand for IT services during the most recent lockdown period.Our own forecast for the whole of 2020, as set in January, was -6%, and so it was also beaten by the actual substantially.In policy terms, the outcome is likely to affirm the MNB's most recent relative tightness on interest rates and its preference for a stable EURHUF exchange rate.