Last year, the amount of foreign direct investments totalled EUR 10.462bn in Hungary, which exceeds the previous year’s figure by EUR 6.7bn and which is the largest amount ever recorded. The amount of outbound FDI by Hungarian enterprises in 2012 was EUR 8.210bn, EUR 5bn above the level registered one year earlier.

According to statistics compiled by the National Bank of Hungary (MNB), the total of almost EUR 10.5bn invested in Hungary was comprised of EUR 4.7bn worth of shares, other holdings and re-investments and EUR 5.76bn worth of other capital transfers. As the MNB provides no detailed information on individual investments or case-by-case company transactions, the central bank revealed only that share capital increases, borrowing, decreasing outstanding claims and conduit financing instruments generally belonged to this category.

The Ministry for National Economy also noted that working capital inflow and outflow recorded an extremely positive balance of EUR 2.251bn, the highest figure since 2008. The MNB underlined that individual investments have not been taken into account for the calculation of this favourable figure.

The Ministry expects that FDI to Hungary will be some EUR 3bn in 2013, excluding large, one-off transactions. In the medium term, inbound FDI is expected to be around EUR 3.5bn per year, also excluding one-off transactions. This year, Hungarian outbound FDI – excluding one-off transactions – is anticipated to be around EUR 1bn, while in the medium term the Ministry for National Economy is expecting this figure to be around EUR 1.5bn annually.

The stock of inbound FDI totalled EUR 78.5bn in Hungary at the end of 2012, which figure is the highest value in percentage of GDP, and the second highest per capita reading within the Central and Eastern European region. The inbound FDI-to-GDP ratio is 80.3 percent. The same indicator is 67.7 percent in the Czech Republic, 57.4 percent in Slovakia (at the end of September 2012), while Poland and Romania are lagging far behind with 45.8 percent and 42.4 percent, respectively.

Outbound FDI by Hungarian enterprises was EUR 26.3bn at the end of last year, which figure is the highest in percentage of GDP, and the second highest per capita reading within the Central and Eastern European region. The largest share of Hungarian outbound FDI targeted the services and crude oil processing sectors, and 32.1 percent of the amount was invested in the CEE region.

In addition to the promising developments regarding last year’s capital inflow and outflow, according to the GKI research institute, expectations for Hungary’s economic performance improved “significantly both among businesses and consumers”.

The GKI-Erste economic sentiment index , adjusted for seasonal effects, jumped to a two-year high in May, a continuation of the growing trend seen since autumn 2012. The index rose to minus 16.7 from minus 21.7, the strongest since July 2011. According to the EU-funded survey, it has been a year since business expectation was this high, while consumer expectation was last at this level over two years ago.

The consumer-confidence gauge improved to minus 34.4 from minus 38.9, whereas business confidence increased to minus 10.5 from minus 15.6, the best reading since April 2011.

Within the private sector, expectations within all sectors, excluding the service industry, improved significantly in May. The confidence index for industry only rose to the February level, but it has been over a year since the figure for the retail sector has been this high and over two years since the construction industry has enjoyed such high confidence.

Apart from a small trough in April, the consumer confidence index has risen continuously since the autumn. Consumers see their financial situation for the upcoming year, the chances of their buying high-value major durable goods and of them increasing their savings all as better than in the previous month.

(Ministry for National Economy)