Hungary’s GDP contracted by 2.2% year on year in the first quarter of 2010, the consensus forecast of analysts Portfolio.hu polled showed on Tuesday. The projections were in a very wide range, though: those more optimistic see the annual growth at 0%, while the most pessimistic respondents forecast an output decline of around 3%.

István Horváth, economist at UniCredit, belongs to the more upbeat analysts, basing his optimistic forecast on his belief that inventories were started to be filled up after the deepest point in recession had been left behind and also because net exports turned out favourable over the past few months.

Altogether, the market expects a better economic performance from Hungary this year. Nine out of the 11 respondents believe GDP will grow slightly in 2010. The engine of growth is unlikely to be any different in the remainder of the year than before.

Gergely Suppan, analyst at Takarékbank in Budapest, expects stagnation in Q2 and growth from Q3. In his view, the driving force will be strong net exports, a moderate uptick in investments and mostly the inventory cycle. A prolonged decline in domestic consumption, however, represents a downside risk, he said. An upside risk is a better-than-expected external environment, he added.

We can see from the chart above that the last three - highly eventful - months have not changed the analysts’ outlook on Hungary’s GDP considerably. They now expect a slightly bigger growth for the whole of 2010 than in February, but the economists have slightly scaled back their prognoses for the 2011 growth.

Győző Eppich at OTP Analysis Centre said his cautious forecast is attributed to his assumption that some European countries will need fiscal adjustment by 2011."

Source: Portfolio Online Financial Journal