(Bloomberg) -- Hungary’s economy unexpectedly contracted in the second quarter as it confronts lackluster demand for electric car batteries in the automotive industry.
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Gross domestic product fell 0.2% from the previous three month, according to preliminary data released by the statistics office on Tuesday. The economy expanded 1.5% from a year earlier, well below the 2.3% growth forecast by most economists surveyed by Bloomberg.
Hungary’s economy has become heavily reliant on demand for EV batteries after the government of Prime Minister Viktor Orban lured companies, many of them from China, to set up their plants in his country.
Orban’s Economy Minister Marton Nagy, in a statement after the data release, blamed the economy’s weak performance on struggling industrial exports to western Europe, mainly Germany.
He also said the government plans to propose a budget for 2025 after US presidential elections in November that would help small enterprises and families, and lift economic growth to more than 4%.
The latest sign of weakness comes after the government introduced new taxes and extended temporary ones to cover its budget deficit, which reached its full-year target already in the first quarter. The European Union cut access to some of Hungary’s funds over graft and rule of law concerns.
Meanwhile, the central bank signaled last week it intends to continue its more than yearlong cycle of interest rate cuts to spur growth. At 6.75%, the benchmark is tied for the highest key rate in the European Union, matching Romania’s.
--With assistance from Harumi Ichikura.
(Updates with economy ministry statement from 4th paragraph.)
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