In 2020, Hungary’s GDP declined annually by 5.0%, reaching HUF 39,021.4 billion (EUR 109.0 billion). The declining GDP of Hungary reflects the impact of COVID 19 global pandemic on the country’s economy.
Mirroring the trend in the general economy, the number of enterprises in the broad construction sector in Hungary decreased annually by 10.0%, reaching 149,045 in 2020 . At the same time, the number of enterprises increased by 15.2% when compared to the 2010 level (129,409). This was driven by an increase in the number of enterprises in the narrow construction (+21.6%), the architectural and engineering activities (+20.0%) and the real estate activities (+6.7%) sub sectors, over the 2010 2020 period.
Similarly, the volume index of production in the broad construction sector grew by 39.8% over the 2015 2020 period. This was driven by significant increases in volume index of production in construction of buildings (58.2%) and construction of civil engineering (24.9%) over the same period.
Correspondingly, the total turnover of the broad construction sector in 2018 amounted to EUR 34.3 billion, increasing by 49.1% from the 2010 level (EUR 23.0 billion). It further increased to EUR 34.9 billion in 2020 , marking a growth of 51.9% since 2010 and 1.9% since 2018. This was driven by increases in the narrow construction (+69.7%), the architectural and engineering activities (+50.9%), the manufacturing (+33.8%), and the real estate activities (+20.4%) sub-sectors over the 2010 2020 period.
Additionally, the gross operating surplus of the broad construction sector reached EUR 6.3 billion in 2018 , marking 122.7% increment from 2010 level (EUR 2.8 billion). Likewise, the gross operating rate of the broad construction sector, an indicator of the sector’s profitability, stood at 18.5% in 2018, above the 2010 level (12.4%).
In terms of employment, there were 423,230 persons employed in the broad construction sector in 2020, representing 13.6% increase from 2010 level (372,684). This was driven by a growth in the architectural and engineering activities (+23.2%), the narrow construction (+17.5%) and the real estate activities (+10.1%) sub sectors over the 2010 2020 period. Contrarily, the manufacturing sub sector witnessed a decline of 6.5% over the same period.
The housing market has witnessed continuous price increases since 2015. In fact, the house price index increased by 77.7% between 2015 and 2020. With regards to housing demand, the number of transactions in Hungary's residential property market reached 15,630, exceeding the 15,000 mark for the first time in last ten years. These increases were mostly driven by increasing disposable incomes, increasing urbanisation, lowering interest rates, but also government measure. The government announced lowering VAT on new housing construction to 5.0%, against Hungary's standard rate of 27.0% and approval of USD 10,000 (EUR 8,410.8) as grants for home renovations. This is expected to give a further boost to the housing market.
The Hungarian government continues to prioritise investments in infrastructure, as a means to foster economic growth. Under Hungary’s 2021 budget, a continuation of the infrastructure development programme has been announced, which includes the extension of motorways to the state borders and the connection of the regional centres to the high speed road network. Furthermore, in 2020, the European Investment Bank (EIB) Group invested almost EUR 345.0 million in infrastructure in Hungary. In addition, in 2020, the government spent significant resourced to develop the country’s infrastructure. Around EUR 650 million was spent for highway developments, EUR 500 million for refurbishing the public road network, and EUR 410 million for developing the railway network .
Under its Recovery and Resilience Plan (RRP), Hungary plans to invest part of its overall a budget (EUR 7.2 billion) in the following key policy areas: green transition, healthcare, research, digital, cohesion and public administration .
Hungary has notably allocated EUR 723.0 million for extending the capacity of the Budapest suburban rail network and EUR 663.0 million towards the development of a competitive urban and suburban public transport fleet in Budapest. Hungary has also committed EUR 57.0 million towards eliminating rail bottlenecks on the TEN-T corridor and EUR 86.0 million for deploying central traffic management on TEN-T railway lines. Additionally, the country has planned to invest around EUR 454.0 million to support residential solar systems and electrification of heating systems in combination with solar systems. Last, Hungary has also allocated EUR 188.0 million for the construction and renovation of social housing, improvement of housing conditions as well as EUR 33.0 million for the development and promotion of community renewable energy production and use.
Since the gradual lifting of restrictions imposed in order to tackle the pandemic, the Hungarian economy along with the construction sector has shown signs of recovery. This is partly linked to the implementation of government’s support measures.
One such initiative amongst all the measures and initiatives announced by the Hungarian government was the launch of Funding for Growth Scheme (FGS) Go! (Növekedési Hitelprogram Hajrá!) in April 2020. It aims to support domestic companies facing difficult situation due to the effect of the pandemic on economic activity.
Despite such developments, the Hungarian construction sector still faces some major challenges. The most important relates to shortages of skilled labour. With respect to the Hungarian construction sector, more than 60.0% of the companies complained about the shortage of labour in the early 2020. While in other EU Member States such as Poland, the shortage is partly offset by migrant labour, this is not the case in Hungary. Indeed, the government has put in place strict migration policies, which prevents migration flows of labour migrants.
As a result of government initiatives supporting the development of infrastructures and the housing market in the country, the future of the Hungarian construction sector looks rather optimistic. To be sustainable, more will need to be done to tackle the issue of skills and labour shortage in the sector.