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No War-Economy: Hungarian Industry’s Performance Better than Expected

On Friday, the Hungarian Central Statistical Office (KSH) published that the volume of industrial production in June 2022 was 1.5 percent higher than a year earlier, adjusted for working days, production rose by 4.8 percent compared to the same period of the previous year, and industrial output increased by 0.6 percent compared to the previous month, based on seasonally and working day adjusted data.

Looking at the newly released figures, Gábor Regős, head of the Macronome Institute, stressed that despite the unfavorable circumstances (such as the Russian-Ukrainian war), and the shortage of spare parts and rising energy prices, industrial production expanded both on a monthly and annual basis, and the sector’s performance was better than expected. Growth was driven by the more important manufacturing sectors, while output in smaller sectors tended to fall.

Importantly for Hungarian industry, German industry also performed well, albeit with less co-movement than in the past.

Péter Virovácz, senior analyst at ING Bank, pointed out that industrial production levels have returned to levels seen at the start of the year in the past two months, with manufacturers seemingly managing to bridge the supply disruptions caused by the war. Looking ahead, uncertainty is very high, and although the BMI (Purchasing Managers’ Index) points to trend-like industrial growth in the near term, this should be treated with serious caution, especially if companies face new supply constraints.

Gergely Suppan, senior analyst at Magyar Bankholding, pointed out that

the Hungarian economy could benefit significantly in the medium term from investments by BMW and Mercedes and from the build-up of defense industrial capacity, as military spending is expected to increase significantly in the coming years.

János Nagy, macroeconomic analyst at Erste Bank, said it was a positive thing that the automotive sector was able to expand again on an annual basis, but the fact that the vast majority of sub-sectors contracted could be a sign for the future. The short-term outlook remains clouded by a number of uncertainties.

Meanwhile, the war in Ukraine not only has an impact on industry, but on agriculture and the food industry as well. The export of grains are at the center of discussions lately, since Ukraine is one of the biggest exporters and Ukrainian ships could not leave the ports because of the war. However, at the beginning of this week, the first ship managed to leave the port of Odessa containing 26 thousand tons of grains, and in the coming weeks three ships could leave the Ukrainian ports daily due to the agreement between Russia and Ukraine, facilitated by Turkey and the UN.

However, even though food prices have fallen in recent weeks due to the resumption of grain export and fears of recession, experts warn against extreme weather, high energy costs, and soaring fertilizer prices, according to a recent analysis by the Macronome Institute. Due to these factors, food crisis could intensify next year.

source:  https://hungarytoday.hu/no-war-economy-hungarian-industrys-performance-better-than-expected/