GDP: steep deceleration

A160513_GDP1_ENccording to the preliminary data, GDP grew by only 0.9% y-o-y, and the seasonally and working day adjusted growth rate is even lower, 0.5%. Within the EU, Hungary underperformed just about every other member states except Greece, which has been hit by recession. Compared to the previous quarter, GDP fell by 0.9%, which is the first drop since 2012.
On the production side, the causes of the slowdown is clear: along with a formerly unexpected industrial stagnation, primarily due to the weakness in the automotive sector, construction took a dive, with a fall of more than 25%, in the first quarter. Construction suffers from the en160513_GDP2_ENd of the EU-funded projects under the previous programming period. As for the expenditure side, fixed capital formation, hit by the ebb of EU projects, and net export, hit by weak manufacturing (automotive) export, clearly were the culprits in the slowdown, while private consumption managed to keep the GDP growth on the positive side.
We expect a moderate revitalization of industrial growth in the coming quarters, and the construction sector is also likely to end its plounge by the end of the year, Yet, in the light of the weakness in the first quarter, it is uncertain whether the annual GDP growth rate will discernibly rise above 2% in 2016 as a whole.