German firms less optimistic about Hungarian economy

Analysis

Photo by Aritra Deb / Shutterstock.com

German companies in Hungary are less optimistic about the state of the economy in Hungary than half-a-year ago, according to research by the German-Hungarian Chamber of Industry and Commerce (DUIHK), according to a press release sent to the Budapest Business Journal.

Surveyed companies expressed less optimism regarding both the national economy and their own firms, compared to the last survey in February 2018. That survey recorded trust levels by German companies not reached in the last ten years; however, the latest research found that optimism failed to reach such heights in September-October.

"The companies view the momentary state of the Hungarian economy similarly positive as in the spring, but the expectations for the next period have become darker," says Dale A. Martin, president of DUIHK.

Only 35% of the surveyed expect the general state of the economy to become even better, down from 43%, with the amount expecting a turn for the worse growing to 13% from 6%.

The views of the respondents on their own industry and company situation show a similar tendency. Some 55% expect growth in revenues while 17% predict a decrease. The ratio was 70%-6% in the previous survey. Furthermore, only 27% have positive export expectations, down 15%. The number of respondents with negative export expectations grew to 11% from 5%.

The expectations are in line with findings by other institutions, such as the European Commission. In its July prediction, the EC argued that the situation on international markets does not support the growth in Hungary as much as before, with weakening growth prospects possibly leading to corrections in investment and employment intentions.

Some 53% of respondents of the DUIHK survey indicated in February that they want to increase the number of jobs available, with only 9% wishing to cut jobs. That ratio now is 41-15. Currently, 37% plan on undertaking more investments (down 6%), with 13% planning less investments (up 2%).

According to Martin, DUIHK predicts national GDP growth of around 4% for the present year, but expects that to slow somewhat in 2019.

There is something of a divergence between the views of companies that produce more for export and those that do not. Strongly export-oriented companies see the current state of economy and their own company more positively than less export-oriented firms.

Expectations for the next year are similar, but generally more negative among predominantly exporting companies. While these are somewhat keener on hiring new employees, they are more reserved in investment planning. Companies producing for the foreign market expect labor costs to grow by 8%, with firms producing mostly for the domestic market expect these costs to grow by 10%, due to fierce competition on international markets.

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