Hungary’s government expects industry to expand by 5% in 2016

The industry is likely to be able to maintain its growth pace from April in the next months as well, economy ministry state secretary Istvan Lepsenyi said in a TV interview. Industrial output growth might thus reach 5% for the full year, he projected. This seems a downward revision of expectations since economy ministry’s deputy state secretary Mark Aron Lenner had projected industrial output growth of 7.5-8.0% for 2016 back in February. Lenner’s projection was made before data became available for the especially weak industrial output performance in January and March. The government still has not indicated that it could adjust down its 2.5% GDP growth forecast for this year despite the negative revision of expected industrial output. On the other hand, we think the government expects the automotive sector’s troubles, which were largely responsible for the weak industry growth in Q1, to be only temporary, based on Lepsenyi’s statement.

Lepsenyi positively evaluated the pace and structure of the industrial expansion in April. Industrial output rose by 5.3% y/y in April and Lepsenyi pointed to solid growth in the two largest branches of transport and electronic equipment as well as the healthy export growth. The government strategy of developing the supplier industry and the SME segment appeared essentially appropriate, Lepsenyi argued.

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