GDP growth slows in line with expectations

GDP abra_11.14While the growth performance of the Hungarian economy repeatedly surpassed expectations during the first half of 2014, the third quarter preliminary data is broadly in line with expectations. GDP grew by 3.2% year-on-year in Q3, a palpable slowdown compared to the first half of the year, but still a respectable pace.

Compared to the previous quarter, GDP climbed 0.5% in the third quarter, another expected slowdown. Actually, this growth rate can be seen as relatively high, considering that the gross output of industry and construction contracted in the third quarter against the previous quarter. Apparently, the recovery in the services sector continued unabated. As for the expenditure side, net exports probably contributed to the slowdown, possibly along with fixed capital formation.

The year-on-year growth rate is likely to drop well below 3% in the last quarter. We expect the annual average growth to hit 3.3, maybe 3.4% in 2014.