Investments up nearly 17% to historic high in 2017

Sustainability

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In the fourth quarter of 2017, the dynamic increase in investments in the national economy continued, as the volume of investments exceeded the amount in the corresponding quarter of 2016 by 14.4%. In the whole year of 2017, the investment volume increased by 16.7%, historically to the highest level yet, figures from the Central Statistical Office (KSH) show.

The high volume of growth continues to be attributed to developments financed from funds in the 2014–2020 EU budget cycle, to capacity-increasing investments of enterprises, and to the expansion in home-building and other real estate investments, the KSH said in summarizing the data.

In the fourth quarter of 2017 compared to the previous quarter, the seasonally adjusted volume of investments rose by 2.9%.

In Q4 2017 compared to the corresponding period of 2016, the volume of investments went up by 14.4% to HUF 2.295 trillion, within which the volume of construction investments rose by 21%, and investments in machinery and equipment by 8.5%.

A 3.1% growth in investment was recorded at enterprises employing at least 50 persons, these realizing more than half of investment performance, while 69% growth was seen at budgetary units, realizing 15% of investment performance.

Some 60% of investments were realized in three branches of the national economy; namely manufacturing, real estate activities, and transportation and storage.

Developments in manufacturing - representing more than a quarter of investments in the national economy, continuing a steady expansion lasting since the beginning of 2016 - grew moderately by 1.9%. The most significant contributors to the increase were large-scale investments in the manufacture of transport equipment.

Investment volume in real estate activities, considered the second largest investor, grew sharply by 40%, with growth seen both in home construction and renovation and in commercial property developments.

The volume of investment in transportation and storage, considered the third largest investor based on developments, grew by 4.2%. Beside motorway, road and railway construction projects financed from EU funds, enterprises engaged in air transport, warehousing and postal and courier activities upped developments significantly.

EU funding drives public investment

In mainly publicly financed areas, investments expanded at a rate above average, primarily due to developments financed from EU funds. Investment volume exceeded the previous year’s level in the fields of public administration, defense and compulsory social security (by 78%), in education – mostly due to higher education-related developments (by 72%), and in human health and social work activities, mainly related to in-patient care (by 59%).

Meanwhile, investments slightly decreased in agriculture (by 3.9%), while investments of business units operating in construction – partially as a result of the expansion in output – grew by 18%.

The main contributors to the 53% rise in investment volume in accommodation and food service activities continued to be hotel construction and renovation, occurring in parallel with service increases at accommodation establishments.

The 26% growth in investment in financial and insurance activities was partly due to commercial bank branch renovations and developments related to computer acquisitions.

In arts, entertainment and recreation, the substantial (19%) expansion of investments in new tangible assets continued to be driven by large-scale investments in primarily high-performance sports and culture.

In 2017 compared to the previous year

The volume of investments in the national economy grew by 16.7% in 2017 as a whole, compared to 2016, to a record total of HUF 6.439 trillion, within which the volume of construction investments grew by 21.3%, and investments in machinery and equipment by 12.8%.

Investment performance grew by 13.8% in the case of enterprises employing at least 50 persons, providing 56% of annual investments, and by 59.2% in the case of budgetary units, providing 13% of investments in 2017.

Among branches of the national economy, the volume of investment rose in manufacturing – realizing one-third of the total value – by 7.3%, and in the other two significant branches of transportation and storage (by 24.1%), and real estate activities (by 22.5%). These three branches together accounted for some 60% of annual investment performance.

Considering the whole year, investment activity rose in agriculture (by 12%), in information and communication (by 19%), in professional, scientific and technical activities (7.5%), in arts, entertainment and recreation (by 37%), and in construction (11%).

In the section of financial and insurance activities, representing a relatively small weight, a 22% annual investment growth occurred.

Investment figures for the first quarter of 2018 are due to be published by the KSH on May 30.

Analysts see slower investment growth in 2018

K&H Bank chief analyst Dávid Németh told state news wire MTI that a big jump in investments was expected because of the low base, improved absorption of EU funding and construction developments. On the other hand, he cited as a negative trend that investment growth accelerated in the public sector but decelerated in the business sector.

Orsolya Nyeste, head analyst at Erste Bank, said the connection between EU development funding and investment growth remains strong. Investment growth is set to continue in 2018, but not at last yearʼs pace as the base is now significantly higher, she added.

TakarékBank analyst Gergely Suppan said investment growth could remain in the double digits this year. Demand in the construction sector and companiesʼ push towards digitalization and automation to counter rising labor costs should boost investments, he added.

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