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Vehicle industry investments to lift GDP in 2016-18, says MNB

Telco

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Recently announced vehicle industry developments could raise Hungaryʼs GDP by about 0.04 percentage points this year and by more than 0.2 percentage points annually in the next two years as an initial effect, the National Bank of Hungary (MNB) said in its recently published Inflation Report, Hungarian news agency MTI reported Monday.

The impact of investments on growth was part of the reason the MNB left its GDP projection unchanged, at 2.8% for this year and at 3% for 2017, despite projecting a far sharper drop in EU funding-dependent state investments in 2016 and a cooler external climate, mainly due to Brexit and emerging markets. This year, the MNB also expects agriculture to give a 0.8-1.0 percentage-point boost to GDP.

When calculating the effect, the MNB took into account four major car industry projects worth nearly HUF 700 bln combined, creating 3,600 new jobs. 

Once completed, these projects would lift GDP through raising production and through knock-on effects on suppliers such as rubber producers and services, as well as through raising productivity, the MNB said. It also noted, however, that based on past experience, car industry investments have a high import content and would make the Hungarian manufacturing sector even more concentrated and maintain its sensitivity to economic cycles.

The biggest project the MNB calculated with is Mercedesʼ plan to invest HUF 582 bln in the period 2016-2020, nearly doubling its manufacturing capacity in Hungary. Production would start in 2018 and the expansion would result in 2,500 new jobs.

Samsung plans to build a HUF 100 bln electric vehicle battery plant in 2016-2018, with total capacity to be reached by 2018 and a planned new workforce of 600. 

U.S.-based Danaʼs HUF 15 bln high-tech development project would be carried out between 2017 and 2020, with a production launch in the latter year and 200 new jobs.

The most recent project is an investment of HUF 1.5 bln announced by Chinese electric bus maker BYD, which would expand production capacity and create jobs for 300 people in developments to be completed this year.

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