Are you sure?

Analysts remain pessimistic about Hungary's investment prospects

Second-quarter investment data published on Tuesday morning came as no surprise but were still disappointing, analyst told MTI. They do not expect investment volume to improve significantly over the coming quarters.

The Central Statistical Office reported on Tuesday morning that Hungary's second-quarter investment volume decreased for the tenth-consecutive quarter in yr/yr terms, declining 4.9% yr/yr in Q2 after falling 6.4% yr/yr in Q1. Investment volume fell a seasonally adjusted 0.6% from Q1.

Gergely Suppan of Takarékbank said the picture was mixed as investments started to rise in the manufacturing sector while are still sharply down in the property sector. The drop of second-quarter investment-volume data was disappointing even though the drastic decline in real-estate investment was anticipated, he said adding that he does not expect the latter to undergo rapid improvement. Suppan noted that a change in Hungary's VAT regulations prompted increased real-estate sales in the second quarter of 2009, thus creating a high base that contributed to the sharp fall this year.

The Takarekbank analyst deemed second-quarter manufacturing-industry data to be a positive sign for the future, adding that the decline in transportation and storage was, however, unexpected. Suppan remarked that a few large investments such as construction of the Daimler plant in Kecskemét (C Hungary) served to improve the Q2 figures.

Suppan said that the future course of investment volume in Hungary depends largely on the capacity of the government's New Széchenyi Plan to stimulate investment and the degree to which the new extraordinary banking tax acts to curb the possible positive effects of the latter.

Dáavid Néemeth of ING Bank portrayed Hungary's H2 investment prospects as gloomy, remarking that flat investment-volume data would represent a positive result for the period. Néemeth commented that large investments such as the Audi plant in Győr (NW Hungary) and the aforementioned Daimler plant would boost investment next year, though an expansion of demand would be necessary to ensure a long-term increase in investment volume.

The ING Bank analyst said that investments made in the second quarter served an increase in exports but there is no more need for capacity expansion for the meantime. Investment is unlikely to rise significantly in Hungary over the coming quarters, particularly in the real-estate and construction sectors, he said. (MTI-Econews)