Hungary Infrastructure Report Q2 2016
BMI View: We expect slower growth in Hungary's construction sector from 2016 onwards as thegovernment's stimulus for the infrastructure sector comes to an end. EU funding will continue to support thesector - particularly strategic road and rail projects, although we caution the EU probe into cartelallegations in road construction could damage relations with a key financier in the EC.
Strong growth in Hungary's construction sector is not due to last long term, as we expect a rising fiscaldeficit to necessitate a drawback in public investment. Between 2016 and 2025, we expect constructionsector real growth to average 2.9% per year.
Latest Updates And Structural Trends
Civil engineering projects have been the primary drivers of the construction sector rebound, with roadand railway projects in particular, driving the civil engineering growth. However, in November 2015,civil engineering works decreased by 8.0% year-on-year (y-o-y), construction of buildings increased by10.2% y-o-y and the volume of construction output decreased by 0.2% y-o-y (Hungarian StatisticalOffice, January 2016).
A total of 962 development projects co-financed by the EU are currently delayed, business dailyVilaggazdasag published on November 4 2015. Citing cabinet office information, the paper stated that atthe end of Q315 the state sector and local councils were HUF150bn (EUR480m) behind schedule intaking up EU financing. The state body responsible for Hungary's schools had more than 80 projectsbehind schedule and the National Infrastructure Development Company had 50 delayed projects.
Budapest Transport Centre (BKK) projects were also significantly behind schedule. These delays causeda downgrade to our forecasts for the growth of the construction sector, resulting in real growth of 1.9% yo-y in 2016.
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