Central Europe Construction Market Report 2Q 2023
Hungary
Local economic indicators
The International Monetary Fund (IMF) reported Hungary’s 2022 gross domestic product (GDP) growth at 4.9%, forecasting growth in 2023 at 0.5% and a recovery in 2024.
Inflation continues to pressure the local economy, reported at 25.6% in March by the Hungarian Central Statistical Office although a very small recovery of 0.5% has been seen during the last quarter. The IMF forecasts an annual inflation rate of 17.7%.
Construction materials
According to a recent market update, raw materials prices have increased significantly and will continue to rise by another 10–15% throughout the first half of 2023, skyrocketing credit costs.
Inflation remains the highest in Europe, partly due to the relatively high central bank interest rate of 18% and the government extension of mandatory declaration for exports of construction materials.
Contracts
According to the Hungarian Central Statistical Office, a -44.4% change in the volume of new orders was seen in February 2023, with a -11.8% construction output change in volume in the same period, when compared to the previous year.
Although there appear to be sufficient orders in the short to medium term, based on existing contract portfolios, a declining level of new contracts due to falling private and restrained public demand indicates a slowdown should be expected during the second half of 2023.
Market outlook
The construction confidence indicator remained negative in April at -16 despite improved pricing expectations for the same three-month outlook. Insufficient demand is the greatest cause for challenges in Hungary, currently at 43.1 points in the Eurostat construction survey.
Gleeds recommends revising previously set project budgets to present day figures based on local statistical information, our own internal data and 2023 forecasts. Additionally, we are advising investors to consider inflation contingencies in their budgets as materials and labour shortages remain unpredictable.
