Facts & Statistics

The Hungarian state can boost investments

In March, the European Commission enabled Member States to temporarily provide support to SMEs and large companies facing difficulties due to the epidemic.

The budget of the Competitiveness Enhancement Support Program was exhausted, but an additional HUF 50 billion is now available to accommodate new applications, the Ministry of Foreign Affairs and Trade told Világgazdaság after the government’s decision to increase funding was published in the Hungarian Gazette.

The Ministry added that 904 companies have applied for the program so far, and the supported companies have invested a total of HUF 424 billion in 35 industries. These investments may even turn up in the detailed investment data for the third quarter, which will be published by the Central Statistical Office.

Investments may have fallen by 8 percent on an annual basis in the third quarter, but due to the extreme uncertainty, the rate of decline could have fallen anywhere between 5 and 10 percent, Dávid Németh, senior analyst at K&H Bank, said. By comparison, performance fell by 9.9 percent between April and June.

Gergely Suppan, Senior Analyst at Takarékbank, drew attention to how difficult it is now to make forecasts for investments. It expects a decline of 7.6 percent for Q3 but does not rule out that the data may be even worse than in Q2, even 10 percent less than a year earlier.

Zoltán Matheika, senior researcher at Kopint-Tárki Zrt., explained that the program mainly helps companies that have encountered difficulties in implementing previously planned investments. According to the expert, the program is suitable to mitigate the decline in investment activity of medium-sized and large companies due to the COVID crisis. The ministry noted that the government will continue to support investments that create jobs or enable the preservation of existing jobs. 

Zoltán Matheika, on the other hand, believes that the program is hardly suitable for stopping the decline of corporate investments or delivering growth in the short term. He argues that it is not primarily a question of strengthening the position of the medium-sized businesses but rather of stabilizing their position. However, it is worth adding that the state has launched a number of programs to support the development of domestic companies, the total value of which may reach HUF 500 billion in this year’s budget.

Dávid Németh also pointed out that investment is not expected to improve significantly, with the sector behind 2-2.2 percentage points of GDP decline in the third quarter.

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