Q3 GDP growth moderately below analyst forecasts

HUNGARY - In Brief 16 Nov 2021 by Istvan Racz

GDP growth for Q3 has been reported at 0.7% qoq, 6.1% yoy on seasonally and day-adjusted basis this morning. In two domestic polls, the analyst median expectation was 7.2 and 7.4% yoy. Our own forecast was 6.8% yoy.Even though no breakdown was given by KSH, as usual with first estimate GDP reports, the outcome substantiates the Finance Minister's recent scaling back of its annual forecast by 0.5%-point, to 6.8%. Moreover, even that new official figure may look a bit too optimistic in the light of the Q3 outturn. Given the persistence of the weakening factors the Ministry mentioned, Q4 seems unlikely to be any stronger, and so annual GDP growth may end up somewhere between 6-6.5% yoy, down from the 6.8% yoy measured on sda basis for the first three quarters of 2021 together.However, the weakness of the Q3 figure is very relative. Any annual growth rate of 6%+ this year should be regarded as way above original expectations. The budget plan was originally based on the expectation of 4.3% growth only, and in late summer / early fall, the precondition for the currently intended return of the income tax to families, in terms of 2021 GDP growth, was set at 5.5%. Indeed, what we see today is a quite decent growth rate by any reasonable standards.In part because of this, and in part because of the severity of the inflation problem, the new GDP figure is unlikely to weigh much in today's Monetary Council rate decision. Right after the publication of the October inflation data, we saw a 50% chance for a higher than 15bps rate hike today. However, after the government's intervention to temporarily fix (and thereby reduce) fuel prices, we think this probability has fallen back to a...

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