Slowdown of European economies poses risks for Hungary’s industry

Slowdown of European economies poses risks for Hungary’s industry

/ bne IntelliNews

By Tamas Csonka in Budapest December 14, 2023

The output of the automotive industry, Hungary's biggest manufacturing sector, rose 4.9% year on year in October, accelerating from a 1.2% increase in the previous month; however, the monthly data showed declines. The slowdown of European economies however poses risks for growth of Hungary’s export-oriented industry.

KSH confirmed that the headline figure, which showed output falling 3.2% (chart) in the month (adjusted figures showed a 2.8% fall) slowed from a 7.3% decline in the previous month. The output contracted by a seasonally and workday-adjusted 0.6% month on month.

The detailed data show output of the electrical equipment segment, which made up 12% of manufacturing output, rose 9.0%. The output of the food, drinks and tobacco segment, producing mostly for the domestic market, slipped 2.8%. It comprised 13% of manufacturing sector output for the month.

Production output contracted 4.7% y/y in the first 10 months.

Export sales, accounting for 61% of the total, slipped 1.8% and domestic sales dropped 8.7%. In absolute terms, industrial sales reached HUF5.9 trillion (€15.5bn) in October.

Hungary’s industry started out the quarter on a weak note, continuing the near stagnation of previous quarters. The energy crisis has stalled the post-pandemic rebound, and industrial players are struggling from high energy costs. This is true, especially for sectors serving the local market, while large multinational companies operating at a much higher efficiency were unfazed by the crisis. The renewal of energy contracts, at lower tariffs, is expected to improve the liquidity of smaller companies.

The slowdown of economic activity in the Eurozone poses real risks for Hungary, which does 75-80% of its trade with the EU, as reflected by the latest data on new orders, down 7.1% y/y. New domestic orders declined by 2.5% and new export orders by 7.9%. At the end of the month, the total stock of orders fell 5%.

In the longer run, new capacities in the vehicle sector, namely battery production, have a visible impact on Hungarian industrial output.

Production of South Korea’s SK Innovation €1.9bn battery plant in central Hungary began production in November, which could have a visible impact on industrial exports. The plant has a production capacity of 30 GWh per year, making it one of the largest battery plants in Europe.

For the year, Hungary’s industry could contract by 5-6% after a 6.1% growth in the previous year.

#Hungary #industry

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