2013-09-26 10:26:05 - Recently published research from Business Monitor International, "Hungary Infrastructure Report Q3 2013", is now available at Fast Market Research
Although favourable base effects will help the Hungarian construction sector to return to positive growth territory in 2014, we maintain our core view that a complete recovery in the sector's real value remains off the cards anytime during the forecast period to 2022. We see the residential and nonresidential construction sub-sector losing its dominance in the construction sector over the forecast period as weak economic outlook, uncertainty surrounding the financing of planned projects and the overburdened private household sector will deter investments into the sector. Meanwhile, continued commitments towards infrastructure projects will see the sub-sector increase its share in total construction industry value from more than 45% in 2012 to almost 51% in 2022.
Our overall cautious outlook for Hungary is
evident from the fact that our forecasts for Hungarian real GDP growth for 2013 and 2014 remain low, at -0.3% and 1.1% respectively, due to concern surrounding the country's political direction as well as disappointing Q312 and Q412 data. The most recent data released by the Hungarian Central Statistics Office (KSH) show that the Hungarian economy contracted by 2.7% yearon- year (y-o-y) in Q412, an increase on the previous quarter's contraction. Meanwhile, the fact that vacancy rates in commercial dwellings stand at more than 20% in cities such as Budapest prompts us to forecast lacklustre growth, averaging only 0.5% y-o-y, in the residential and non-residential construction sub-sector during the forecast period. However, we see the infrastructure segment growing a more impressive 3% y-oy (in real terms) on the back of sustained growth in the transportation and energy and utilities segments.
Full Report Details at
- www.fastmr.com/prod/686319_hungary_infrastructure_report_q3_2013 ..
Following the key areas of growth in the sector:
* Commitment To Transport Spending: The biggest growth opportunity for the country's transport infrastructure is the support given by the EU to drive the modernisation of Hungary's road and rail links and improve freight transport throughout the country. We expect growth in the railways sub-sector to outpace growth in the overall transport segment as the government remains committed to bring investments into the segment. In February 2013, the Hungarian government revealed its plans to build a new railway link in the country, in project which is most likely to be funded by Chinese help. The project, which is estimated to cost nearly HUF360bn (US$1.6bn), will entail construction of a two-track link and two bridges across the river Danube.
* Pipeline Projects: A number of international natural gas pipelines passing through the country have the potential to bring substantial investment in the Hungarian energy and utilities segment. In addition to various pipeline projects with its neighbours, Hungary has joined four other countries in the region to sign an intergovernmental agreement that apportions gas flowing through the planned Nabucco pipeline from Central Asia. Although the project has been impeded by significant delays and cost concerns, Bulgarian Prime Minister Boyko Borisov revealed that he expects the construction of the Nabucco pipeline to begin in January 2013 and be operational by 2017.
However, we also highlight the risk of project delays owing to possible funding constraints. Following the grounding of flag-carrier Malev in February 2012 , work on the Cargo City project has been postponed and is now due to start from 2014. As recently as February 2013, Hungary's 2GW nuclear power plant in Paks revealed plans to request for the extension of its 500-megawatt second oldest generation unit until 2034. However, the question still remains over who will pay for investments in the nuclear sector.
As a result of these uncertainties and poor growth prospects, Hungary ranks 11th in BMI's infrastructure risk/reward ratings for Central and Eastern Europe with a below average score of 54.6 points this quarter. There could be more downside to this score if our outlook for the construction sector changes for the worse.
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