The Hungarian first quarter GDP showed 0.7% Y/Y decline and 1.2% Q/Q drop as the economy has been hit by the fiscal contraction and slowing export demand. Preliminary data does not contain more details figures about what could have been behind, but we suspect that almost all segments of the economy showed some contraction. Previously, the April industrial output figures were notably weak suggesting that production and export at the newly built Mercedes plant has net started. Its impact is estimated to boost export by about €5bn or 5% of GDP, of which some 1/3rd could be added-value.
The central bank governor added to these concerns by saying that the newly published Inflation Report on Tuesday-Wednesday will show worse growth outlook than the previous one, which had growth forecast around zero. He also mentioned possibility of a rate cut over the next 12-months, but of course only at the end of this period.
Overall, Hungarian markets remained broadly unaffected by these news and are following the international sentiment, which turned sourer as equities fell again.