Construction sector nosedive continues to cast shadow over Hungarian economy

Construction sector nosedive continues to cast shadow over Hungarian economy
Hungary's construction sector has nosedived in 2016
By bne IntelliNews July 15, 2016

Hungary’s construction output plummeted 26.6% y/y in May, statistics office KSH reported on July 15. The data suggests a free fall in the sector that started in January due to a sharp decline in projects driven by EU funds continues unabated.

Although on a monthly basis output grew 0.8%, May marked the fifth month of huge annual decline in a row, following a 29.8% y/y drop in April. While the auto sector’s struggle to stabilise continues to impact Hungarian industry, the weak output of the construction sector will only raise concern over the country's wider economic performance in the second quarter, after it registered a 0.8% q/q contraction in Q1.

The fall in construction output reflects declines in both building construction and civil engineering. However, it was the 43.8% drop in the latter that did most of the damage. While the volume of new contracts was 15% higher in annual terms, the month-end volume of the contract portfolio of construction companies was 10.5% lower than a year earlier, suggesting a pick up is not likely in the immediate future.

Like its regional peers, Hungary rushed to absorb as much financing from the EU's 2007-13 budgetary window as possible in 2015, as it sought to catch up in the final year for claims. Projects funded under the 2014-20 programme are yet to get up and running.

Hungary has said it is pushing to accelerate the process in order to soften the impact on the economy. The government is set to allow businesses that win EU funded tenders to receive 50-100% of funds in advance. The European Commission, however, is reported to oppose such a high level of advance payments.

In an additional to the bid to support the EU funds coming into the sector, the government has also lowered value added tax on home building to 5% from 27% in 2016-2019, announced a new housing subsidy programme, and also a scheme to set up state-backed building societies.

News

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss