Boston, MA -- (ReleaseWire) -- 04/15/2014 -- Like much of Central and Eastern Europe, Hungary's auto sector is very much output-led, with a focus on mass production of low profit small and medium-sized cars.
Many large global carmakers such as Knorr-Bremse, Bosch, GE, Continental and Audi have production and R&D facilities in Hungary, with the industry as a whole employing directly or indirectly over 100,000 people, according to the Hungarian Investment And Trade Agency (HITA). Around 90% of vehicles made in Hungary are export, claims HITA, rising to over 80% for engines and components. Most exports (86%) go to within the EU - mainly Germany - and to countries outside the EU such as Russia.
HITA says Hungary is the market leader in terms of engine manufacturing in the region. The Budapest Times reports in February 2014 that Prime Minister Viktor Orban is encouraging increased output from the country's automobile industry. In response carmakers in the country, among them Audi, Daimler, Opel and Suzuki Motor have all stepped up production or added capacity at their local plants in Hungary in the past 12 months.
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Automotive companies remain the engine of growth for the country's industrial sector: Hungary's headline industrial output rose 6.8%, with the vehicle industry making up about EUR15bn of the total Hungarian exports HUF80bin in 2013, according to data published by the Central Statistics Office (KSH), reports the Budapest Business Journal in February.
We estimate vehicle production in Hungary rose 7.9% year-on-year (y-o-y) in 2013, to 235,000 units. We believe it will rise 8.3% y-o-y in 2014, to nearly 254,500 units. We forecast annual vehicle production growth to stand at 8.3% in our five-year forecast period from 2014 to 2018.
The Hungarian economy will continue on a slow path of economic recovery in 2014, with the major contributions to growth coming from net exports and private consumption. Exports are set to rise as the German economy is boosted by rising consumption, which in turn will boost demand for goods made in Hungary such as autos. Hungarian consumption will rise on the back of low inflation, rising nominal wages and low interest rates. As a result we forecast real GDP growth of 1.7% and 1.9% in 2014 and 2015 respectively.
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