Hungarian investment fell 20% y/y in 2016, according to a preliminary estimate from the statistics office (KSH) released on February 28.
The worrying sign for Budapest is that the picture is not getting any better. Investment fell 24% in the fourth quarter, KSH added.
Hungary, the one-time darling of CEE investors, has not experienced such a large fall since its change of political system in 1990. Unsurprisingly, KSH explains the fall as consistent with the change of EU budget cycles,
The steep fall was due to heavy government spending in Q4 2015, as the government rushed to complete projects before the end of the EU funding cycle for 2007-13.
The majority of high-total-value projects for the 2014–20 cycle settled in the reference period was not yet realised in fixed assets investments,” KSH points out.
Investment in health and social work activities fell 86%, in public administration and defence and compulsory social security investments by 56%, and in education by 58%. Investment volume for construction plummeted by 30%, while that of machinery and equipment diminished by 18% in Q4 of 2016.
However, there are hints that private sector investment also dropped. For enterprises with at least 50 employees investment performance shrank by 8.9%, while that figure was 63% for budgetary units and entities. Transportation and storage investment rates fell by 31%. Machinery and equipment investments fell by 6.6% and construction investments by 32%.
Growth occurred in some sectors, however. Manufacturing investment grew by 7% y/y, and wholesale and retail trade by 10%, KSH wrote.
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