An Overview of Foreign Direct Investments
FDI inflow data for 2004
In January-June 2004 910 million euros of net FDI inflow in form of equity
capital and reinvested earnings was registered in Hungary. That exceeds the
level of the same period of previous year by 531 million euros. The balance of
other capital movements (intercompany loans) was +25 million euros as compared
to +331 million euros in the same period of last year, thus the total FDI inflow was
225 million euros higher than in the same period of last year.
FDI inflow to Hungary
(equity capital and reinvested earnings)
1 200
966
1 000
910
812
euro million
800
771
784
726
600
379
400
200
0
H1 1998
H1 1999
H1 2000
H1 2001
H1 2002
H1 2003
H1 2004
Source: National Bank of Hungary
In the first half of 2004 the inflow of equity capital accounted for net 422 million
euros, that is the highest amount since 1990. Considering the one and a half
decades long presence of FDI in Hungary it is important to follow the gross FDI
flows with attention. According to the detailed data for the first half of 2004 the
gross FDI outflow reached only 20% of the gross inflow, and looks small beside
the total FDI stock (see later). According to the estimates of the National Bank of
Hungary the balance of reinvested earnings was -13 million euros that is 241
million euros worse than in the same period of last year. This was caused by the
420 million euros higher amount of dividends and distributed income paid by
foreign-owned companies.
Decomposition of FDI inflow by countries and sectors
According to the data for 1999 – H1 2004 most FDI (in form of equity capital, net)
has flown from Germany (1 504 million euros, 29.3%), the Netherlands (814
million euros, 15.9%), the United States (749 million euros, 14.6%), Austria (668
million euros, 13%) and Japan (487 million euros, 9.5%) to Hungary.
The share of equity capital inflow by countries
1999 - H1 2004
Other
17.7%
Austria
13.0%
USA
14.6%
Japan
9.5%
The Netherlands
15.9%
Germany
29.3%
Source: National Bank of Hungary
According to sectoral decomposition most FDI (66.4%) was invested in
manufacturing (of which electrical and optical equipment 1 121 million euros
(21.8%), transport equipment 595 million euros (11.6%), basic metals and
fabricated metal products 509 million euros (9.9%), machinery and equipment
332 million euros, 6.5%) and financial intermediation (1 162 million euros,
22.6%).
The share of equity capital inflow by industries
1999 - H1 2004
Other
9.6%
Financial
intermediation
22.6%
Manufacture of
transport
equipment
11.6%
Manufacture of
machinery and
equipment
6.5%
Manufacture of
basic metals and
metal products
9.9%
Manufacture of
electrical and
optical equipment
21.8%
Wholesale and
retail trade, repair
18.0%
Source: National Bank of Hungary
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The stock of foreign direct investments
As a result of the foreign direct investment flows since 1990 the stock of FDI
reached 45 billion euros at the end of June 2004, of which the stock of equity
capital and reinvested earnings reached 34.8 billion euros and the stock of
other capital reached 10.2 billion euros at the end of June 2004.
Decomposition of FDI stock by countries and sectors
NBH-data for 31 December 2002 are available about the decomposition of FDI
stock. The stock of FDI (in form of equity capital and reinvested earnings)
reached 29 758 million euros at the end of 2002. The most FDI stock (in form of
equity capital) originated from Germany (9.7 billion euros, 32.5%), the
Netherlands (4.4 billion euros, 14.8%), Austria (3.2 billion euros, 10.9%) and the
United States (2.5 billion euros, 8.3%).
According to sectoral decomposition most FDI stock (45.6%) was invested in
manufacturing (of which transport equipment (3.2 billion euros, 10.9%),
electrical and optical equipment (2.7 billion euros, 9.1%), chemicals and
chemical products (1.7 billion euros, 5.7%)) and real estate activities and
business activities (3.6 billion euros, 12%), wholesale and retail trade, repair (3.3
billion euros, 11.1%), financial intermediation (3.1 billion euros, 10.3%) and
transport and communication (3 billion euros, 10.1%).
Outlook for 2004
Parallel to the recovery of Western-European economies and the hopefully
resulting boom in global capital flows (and partly relating to the EU accession) the
capital inflows to Hungary can gain additional dynamism. Considering these
facts and the inflow in January-June we estimate the annual FDI inflow to be 33.5 billion euros (in form of equity capital and reinvested earnings) in 2004
(out of which reinvested earnings account for 1.9 billion euros). Since other
capital movements are subject to significant uncertainty, exact prediction is
not available.
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