In the first half of 2016, investment projects worth HUF 1,800 billion were implemented in Hungary, but the second quarter’s investment activity was 20.3 per cent lower than a year earlier and 0.8 per cent lower than in the first quarter. The Government expects investment activity to improve significantly in the period ahead; large companies alone have announced planned developments worth HUF 1,000 billion.

According to an estimate by the Ministry for National Economy, despite unfavourable trends the rate of investment reached around 20 per cent, which is higher than the EU average.

The reason for the fall in the first half of the year is that the previous EU budget cycle has ended; in the second quarter, however, disbursements of the new cycle have started and have improved results. Further expansion is expected for the rest of the year.

In the second quarter manufacturing companies performed well: investment in the processing industry – which is largest sector, accounting for one third of the industry – grew by 11.1 per cent. Trade expanded by 21 per cent, while activity in the financial and insurance sector improved by 16 per cent.

Based on the experience of recent years, only some 40 per cent of annual investment activity is realised in the first two quarters, and therefore figures for the second half of the year are more important for the annual result.

The capacity utilisation of the processing industry – which is an indicator of future investment – is still at a high level: according to third quarter forecasts, Hungary’s index will reach 82.1 per cent, and will thus be higher than the forecast EU average of 81.5 per cent. This shows that the utilisation of Hungary’s manufacturing capacity is significant, and this will have a favourable impact on new investments and on the development of GDP.

Positive expectations are also supported by the fact that a number of large-scale investments were recently announced, which – in the near future – will result in developments worth HUF 1,000 billion, accounting for 3 per cent of the annual GDP.

The investment activity of SMEs is facilitated by favourable yields and a positive business environment, as well as the loan facility announced for 2016, which is aimed at enhancing investment.

In the first six months of the year 3,420 new dwellings were built in Hungary, which was a 10.9 per cent increase year on year. It is expected that favourable trends in the real estate market will continue throughout the coming quarters as well, as the Housing Programme serves as a significant incentive on both the demand and supply sides. Based on the Ministry’s calculations, in 2016 the number of newly-constructed homes will reach 13,000.

(Ministry for National Economy)