2,548 billion forints (EUR 8.3 billion) in investment projects were realised in Hungary during the first six months of the year, which is a record amount with relation to the data for the first two quarters that has been available since 1995. The Government expects a further increase in investment on the part of enterprises, the public and the public sector alike.
Based on the large number of construction permits issued, the number of new housing construction projects is also expected to continue to increase, in addition to which, with relation to the public sector, both domestic and EU-funded development projects will also be realised at an increasingly rapid rate. In addition to the already announced large volume of development projects, the further increase in private sector development projects is also projected by the investment promotion effects of the reduced, 9 percent level of corporation tax introduced from the beginning of 2017 within the framework of the six-year tax and wage agreement.
In addition to capacity expansion projects on the part of enterprises, the realisation of developments relating to new EU resources also played a role in enabling a major increase in investment activity. The impetus of investments is also indicated by the fact that a significant increase of 6.3% was registered during the second quarter of the year compared to Q-1.
Practically the whole of the national economy was involved in increased investment; 17 of the 19 sectors showed a dynamic increase in investment in the second quarter. Thanks to new infrastructure development projects and the increase in housing construction, construction projects realised an increase of 33% in Q-2. Some 3 thousand new homes were built during the three-month period, which equates to a year-on-year increase of 46%.
It is particularly favourable that the largest increases in developments projects within the processing industry in the second quarter were realised with relation to the automotive and electronics industries, which is partly attributable to the gradual commencement of recently announced new projects. In addition, the performance of the pharmaceutical, food, electrical and textile industries also increased significantly.
With relation to large corporations, the gradual realisation of previously announced high-volume development projects is expected, particularly involving the automotive industry and the supplier network. These represent over 1400 billion forints (EUR 4.6bn) in investment during the upcoming period, an order of magnitude equalling around 4% of annual GDP. In addition to the low tax environment and favourable business climate, increased activity on the part of small and medium-sized enterprises is also being supported by the accelerated application of EU funding earmarked for economic development.
Hungary’s capital attraction capability is also being further reinforced by the fact that the level of corporation tax was reduced to 9 percent from 2017. Hungary’s flat 9% rate of corporation tax is the lowest in the European Union, encouraging both investment decisions on the part of newly arriving companies, and the planned capacity expansion projects of enterprises that are already present in Hungary.
(Ministry for National Economy)
