Good news on GDP, the budget and the BOP

HUNGARY - In Brief 15 May 2020 by Istvan Racz

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All of the following items are meant to be good news in relative terms only. But one needs to have moderate expectations in these days.No. 1: The first estimate on Q1 2020 GDP growth came out at -0.4% qoq, +2% yoy. This is pretty much around the top of the EU league table and is certainly much better than the -3.8% qoq, -3.2% yoy reported for the Euro Area. Without having details, as usual at the time of the first estimate, we are happy to acknowledge that our value added growth forecasts for industry and construction were too pessimistic on Q1, which probably explains much of the difference between the estimated actual and our -2.2% yoy forecast given for the same period. The other side of the coin is that of course the Euro Area was hit by China's Q1 weakness much earlier than Hungary, so that output in the latter was hit only later, as a second block in the domino chain. This means that Q2 is still likely to look horrible and the rest of this year will be most probably heavily loaded with uncertainty. So we feel it would be just unjustified to extrapolate any part of Q1 into the rest of 2020. The Q1 actual may pull up our annual real GDP forecast to -8% from the -8.8% we presented in April, but that is about it for the time being. By the way, the EU Commission is currently predicting -7%, the government -3-(-7.3)%, depending on the rundown of the epidemic, the MNB is sticking to +2-(+3)% (!), and there are forecasters even more pessimistic than us, down to a -10% growth forecast at the negative end of the range. So it does not exactly look like there is full agreement on the subject.No. 2: Following a poor start in Q1, the central government cash budget came out of ...