No war economy: the performance of Hungarian industry is better than expected

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

Looking at the recently published figures, Gábor Regős, director of the Macronome Institute, pointed out that despite the unfavorable circumstances (such as the Russian-Ukrainian war), the shortage of spare parts and the increase in energy prices, the industrial production increased on both a monthly and annual basis, and the sector’s performance was better than expected. Growth was driven by the larger manufacturing sectors, while output in smaller sectors tended to decline.

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

Péter Virovácz, principal analyst at ING Bank, pointed out that industrial production levels had returned to levels seen at the start of the year in the past two months, as manufacturers appeared to be able to fill supply disruptions caused by the war. . Looking ahead, uncertainty is very high, and although the BMI (Purchasing Managers Index) indicates near-term trend industrial growth, this should be treated with great caution, especially if companies are facing to new supply constraints.

Gergely Suppan, principal 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 strengthening 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 could grow 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.

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Meanwhile, the war in Ukraine is not only impacting industry, but also agriculture and the food industry. The export of grain has been in the center of discussion lately, since Ukraine is one of the biggest exporters and Ukrainian ships could not leave the ports because of the war. However, earlier this week, the first ship managed to leave the port of Odessa containing 26,000 tonnes of grain, and in the coming weeks three ships could leave Ukrainian ports daily due to the agreement between Russia and Ukraine, facilitated by Turkey and the UN.

However, even as food prices have tumbled in recent weeks on rebounding grain exports and recession fears, experts are warning of extreme weather, high energy costs and soaring grain prices. fertilizer, according to a recent analysis by the Macronome Institute. Due to these factors, the food crisis could intensify next year.

Feature photo: MTI/Ujvári Sándor

Laura T. Thrasher