GDP: Consumption Pulled Growth by Public Handouts

Consumption growth was the most significant factor in the second quarter GDP growth figure of 6.5%, which exceeded expectations, with the tourism and logistics sectors leading the expansion. For the third quarter, analysts expect a significant contraction, the business news site napi.hu reports.

In the first half of 2022, economic output was 7.3% higher than in the same period of the previous year, the Hungarian Central Statistical Office said in its detailed GDP report on Thursday. According to the data release, GDP volume in the second quarter of 2022 rose by 6.5% year-on-year.

The output of industry expanded by 3.9%, including manufacturing by 4.5% compared to the same period of the previous year. The value added by the construction instruction increased by 0.4%, while that of agriculture fell by 35.5% year-on-year due to the severe drought.

The gross value added by services altogether increased by 10.5%. The strongest increases were recorded in accommodation and food services (46.2%), transport and storage (20.9%) and arts, entertainment, recreation and miscellaneous activities (20.8%). The value added by professional, scientific, technical and administrative activities and information and communication both increased by 13.4%. The value added by trade increased by 9.1%. That of financial intermediation and insurance activities increased by 6.4%. The value added by public administration increased by 0.5% and that of human health and social work activities by 13.6%. Education output increased by 5.4%.

Services and industry contributed 5.7 and 0.9 percentage points respectively to the 6.5 and 0.5 percentage point increase in gross domestic product in the second quarter of 2022. Within services, the main contributors to GDP growth were trade, repair of motor vehicles, accommodation and food services (1.3 percentage points). Growth was held back by a 1.1 percentage point decline in the performance of agriculture, while construction had no significant impact on GDP volume change this time.

All this suggests, the news site concludes, that consumption growth was the main driver of economic growth, in which the government's cash distributions in the election campaign at the beginning of the year – the refunding of the family allowance and the full payment of the 13th month pension – may have played a major role. But inflation may also have improved the balance of income from services.