Hungary's Economy Expands Faster Than Expected on Industry Surge

  • Fourth-quarter expansion pushes full-year growth to 2.9%
  • Minister sees growth pace sustained in first quarter of 2016

Hungary’s economy expanded at a faster-than-expected pace in the last quarter of 2015 as robust industrial output outweighed a decline in agriculture and stagnating construction.

Gross domestic product rose 3.2 percent from October to December compared with a year earlier, the Budapest-based statistics office said in preliminary data on Friday. The median of 12 estimates in a Bloomberg survey was for a 2.5 percent gain. The economy grew 1 percent from the previous quarter, compared with expectations of a 0.7 percent expansion, and full-year growth was 2.9 percent.

“The main reason behind the jump in growth is that all segments of industry showed a strong performance, not just the usual vehicle manufacturing,” statistician Zsuzsanna Boros told reporters in Budapest. Agriculture and construction were the only two sectors failing to add to economic gain in the period, she said.

Hungary’s central bank and government are working to stave off an expected slowdown this year as European Union funding, the main source of investment in the eastern EU nation, will drop. The planned steps include giving banks incentives to boost lending and targeted tax cuts for certain industries.

The decline in EU funds and weaker international demand may slow growth in the first two quarters, and the pace may return to a faster clip in the second half on the back of the government’s housing subsidy program, according to David Nemeth, an economist at KBC Groep NV’s Hungarian unit.

The forint gained 0.3 percent to 310.15 against the euro at 10:11 a.m. in Budapest. The currency has strengthened 1.7 percent this year, the best performance among 24 emerging-market currencies tracked by Bloomberg.

Growth probably remained strong in the first quarter, slowing only to 3 percent, Economy Minister Mihaly Varga told state television channel M1 on Friday. The pace of expansion probably helped push the budget deficit to below 2 percent of output, the Economy Ministry said in an e-mailed statement.

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