The View 9

ECONOMIC OVERVIEW

8

GÁBOR BORBÉLY MRICS Director, Head of Business Development and Research

4.9% GROWTH IN 2019, 3.5% FORECASTED FOR 2020

In 2019 the Hungarian economy continued to surprise in terms of growth. GDP growth in 2019 reached 4.9% - well-above previous expectations. This was the first time in the current cycle when Hungary was able to maintain its dynamic growth despite lower growth in the Eurozone and in the surrounding regional economies. Decoupling from the German economy and the CEE region was mostly due to the solid domestic market which helped to counterbalance the deceleration seen in the export markets. This recipe worked quite well for Poland to avoid a recession in 2009 and 2012 but was never tested in such a small and open economy like Hungary. Looking at the details, economic growthwas robust inmarket-based services andmanufacturing production, while public administration and agriculture exhibited protracted growth. Among the most important sectors, retail, tourism, IT & telecomperformed above the average, while expansion in finance and real estate services was under the GDP growth rate. The construction market also marked a significant slowdown; however, this is understood rather as a normalization following the rampant growth early 2019. December indicators showed a sudden drop in industrial production and construction activities both of which could be explained by the calendar effect due to the unusually long holiday season last year. Q1 figures might be impacted by the recent coronavirus epidemics, but the extent of its economic impact is rather unknown, so its influence is beyond the scope of our analysis.