Unfavorable Investment Data from Hungary
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The volume of investments in the second quarter of 2024 was 16.8% lower than in the same period of the previous year, according to raw data. Compared to the previous quarter, the value of investments decreased by 7.0% at comparable prices, based on seasonally adjusted data, according to the Central Statistical Office.
The performance of investments in the national economy decreased by 14.5% compared to the same period of the previous year, according to seasonally adjusted data.
The manufacturing industry, transportation, warehousing, and trade contributed the most to the decline in investments. The decline was mitigated by the increasing investment activity of public administration, the energy industry, and real estate transactions.
In economics, investment refers to the production or purchase of capital goods, as a result of which an economic actor acquires goods that aid its production or activity. When examined over a given period, it represents the expansion or modernization of an organization’s capital stock, i.e., its stock of capital goods. The statistics characterizing investment refer to the performance value of new and used investments, providing the possibility of data utilization by material-technical composition, national economic branch, and region.
The decline in investments is a signal regarding the future development of Hungary’s production capacity, considering that in the absence of investments, the negative change in production capacity can show its effects for several years.
High bank interest rates (6-7%), significant inflation (4%), and the persistent decline in consumption also contribute to the decrease in investments.
The direction of the Hungarian economy’s development is influenced by the volume of German industrial production. The German industry is currently also achieving lower output compared to the base, not to mention the sales difficulties in the automotive industry.
The performance of the Hungarian economy is also affected by the slowdown in car battery production due to the decreased demand for electric cars.
The volume of Hungary’s gross domestic product in the second quarter of 2024 exceeded the value of the same period of the previous year by 1.5% according to raw data and by 1.3% according to seasonally and calendar-adjusted and balanced data. Compared to the previous quarter, the economy’s performance decreased by 0.2% according to seasonally and calendar-adjusted and balanced data. In the first half of the year, the economy’s performance exceeded the same period of the previous year by 1.3% according to raw data and by 1.5% according to seasonally and calendar-adjusted and balanced data.
The performance of the construction and real estate sectors, as well as the balance of product taxes and subsidies, contributed the most to the increase in economic performance. Economic growth was hampered by the decrease in the added value of industry, which has a significant weight in the national economy as a whole.
The decline in Hungary’s GDP also makes debt service and maintaining the balance of the state budget more difficult. Due to the budget balance, 675 billion forints of state investments were postponed, but a budget deficit of 4000 billion forints has already arisen.
The budget deficit is increased by state purchases that represent the partial or complete acquisition of private companies: Ferihegy Airport (1200 billion forints), Vodafone Hungary (400 billion forints), and government office complexes (600 billion forints).
In recent months, an urgent investment need has arisen in the area of public services. Experts cannot estimate the investment need related to rail transport and healthcare facilities, but they put its value at a minimum of 1500-3000 billion forints, and this amount is currently not available to the government.