KSH: state cut back its investments, foreign companies brought their money to Hungary

In the 1th quarter of 2022, the growth starting in the 2nd quarter of 2021 continued. The volume of investments increased by 8.7% compared to the same period of the previous year, and by 3.2% compared to the previous quarter (seasonally adjusted), the Central Statistical Office (KSH) said on Monday.

The brightening up of investment was driven by business developments and the increased activity of households, while the general government’s investments decreased. The seasonally adjusted investment volume of the reference period was slightly above its previous highest level recorded in the 3rd quarter of 2021.

In the 1st quarter of 2022, seasonally adjusted:

• The seasonally adjusted volume of the national economy’s investments increased by 3.2% compared to the previous quarter. Within it the seasonally adjusted volume of construction investments increased by 2.7%, investments in machinery and equipment grew by 6.0%

In the 1st quarter of 2022 compared to the same period of the previous year:

• The volume of investment activity increased by 8.7%. Within it construction investments representing 58% of the total volume of investments grew by 10%, investments in machinery and equipment representing 41% of the total value of investments increased by 7.0%. About seven-tenths of investment in machinery and equipment came from imports.

Among enterprises employing at least 50 people, realizing 54% of the investment performance, the volume of development increased almost by 11% compared to the low base, where developments of foreign-owned enterprises played a prominent role. At the same time, developments at budgetary units, accounting for 11% of investments, decreased by 13%. Local governments increased their tangible asset purchases, compared to the base period, while central government bodies decreased theirs.

Changes within investments over the reference period differ between sectors.

Developments in manufacturing, the largest investor, accounting for 29% of developments in the national economy, increased greatly, by close to 20%. Subsections performed differently. Among the three heaviest weighted fields, the significant performance increase of the manufacture of electrical equipment offset the huge decline in the manufacture of transport equipment, while developments in the food industry exceeded by 9.4% the same period of previous year’s level.

The performance of real estate activities, the second largest investor accounting for 22% of developments in the national economy increased significantly, by 11%, mainly due to the outstanding growth in the dominant residential construction sector.

The volume growth starting in the previous year slowed down (2.1%) in the investments of transportation and storage section, where the decrease in state infrastructural developments also played a role.

The 2.8% volume decrease in trade is mainly due to the coming to an end of the retail shops’ outstanding developments registered in 2021.

The large expansion of agricultural building development contributed the most to the 20% increase in the volume of investments in agriculture.

The volume of developments in the public administration section lessened by 5.2%, due to the moderate development activity at the central public administration bodies.

Manufacturing contributed the most (by 5.1 percentage points) to the 8.7% volume increase of the national economy’s investments in the 1st quarter of 2022. Investment activity also grew due to the investment performance in real estate activities, agriculture as well as transportation and storage (by 2.3%, 0.9% as well as 0.2%).At the same time performance decrease in public administration and commerce held back the volume increase (in both cases by 0.2 percentage points).

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Analysis

Senior analyst of Magyar Bankholding Gergely Suppán said that investment volume rose to an all-time high in the first quarter. He noted that since the investment growth rate slightly exceeded that of GDP growth, the unexpectedly strong GDP growth in the first quarter may have been partly due to the outstanding growth in investment.

The increase reflects the generous direct support the government gave businesses making investments to offset the negative impact of the pandemic as well as the low-interest loans provided by the central bank and state-owned banks. Manufacturing industry investments were also supported by the high level of FDI inflow, he added.

Rising interest rates, increasing risks due to geopolitical tensions and runaway energy prices and investment costs can create uncertainty but energy-efficiency investments can be recouped even amid higher interest rates, the analyst said.

Source: KSH