Hungary 2Q09 GDP turned out slightly worse than forecast:
* Hungary 2Q09 GDP -7.6%y/y vs -7.4% expected and -6.7% in 1Q09
This was a flash estimates, ie the statistical office did not provide any breakdown by component. Second estimates and components will be released on 8-Sep.
Nevertheless, based on 1Q09 figures and other indicators we assume that consumer demand deteriorated significantly in 2Q09 and pulled down total GDP. We expect gross fixed investment to have stabilized at very low levels and net export to have been positive.
The figure supports the case for monetary easing. In Hungary, the debate has shifted from "when" to "how much". Coupled with softer than expected CPI and the relatively stable HUF, the Monetary Council could consider another 100bp rate cut at the next policy meeting on 24-Aug. Our base case is that the MC will only cut by 50bp but we see a realistic chance for a 100bp cut.