Last year, foreign direct investment (FDI) in Hungary rose by 140 percent, bucking the global trend manifested in a 42 percent decline, the latest Global Investment Trend Monitor of the United Nations Conference on Trade and Development (UNCTAD) showed.
The report said that as a result of the crisis due to the pandemic, greenfield investments fell by 35 percent, cross-border mergers (M&A) by 10 percent and investments based on project financing by 2 percent.
The automotive industry saw the largest decline in reported greenfield investments globally, with a 52 percent drop.
The big winner: China
Several economic analyses have pointed out that China is the big winner of 2020. Due to the epidemic, the Asian country has become the main destination for working capital. The epidemic, according to the Wall Street Journal, only amplified the shift of the global economic power center to the East.
Asked about the outstanding Hungarian performance, László György, state secretary at the Ministry of Innovation and Technology, said that the country chose a different path than most other nations.
“We said that we want to strengthen Hungarian jobs through investments and support companies that spend money on machinery, equipment and technology and to build factories, as they are investing in the future,” György said. “In addition to Hungarians, we support all businesses that consider Hungary as their home and provide a livelihood for Hungarian employees. As a result, while investment sentiment in the world declined by 42 percent, Hungary received almost 2.5 times as much investment capital in 2020 as in the previous year. This is a good foundation for winning once the world economy recovers.”
In Hungary, foreign direct investment increased by 140 percent, from $1.15 billion to $2.77 billion. It is worth looking at which countries outside Hungary were able to achieve similar or better results.
Of the nearly 200 countries in the world, only Belgium, Luxembourg, Sweden and Denmark are ahead of Hungary.
The decline in FDI was the largest in advanced economies with a 69 percent drop, with FDI estimated at $229 billion in these economies. The decline, was the largest in Europe (more than 100 percent), with working capital inflow to the U.S. falling by only half to $134 billion. In this regard, it is significant that China has managed to increase its foreign capital inflow.
In the EU (now excluding the UK), FDI inflows fell by 71 percent to $110 billion, declining in a total of 17 EU Member States, with the largest declines in Germany (61 percent), Italy (more than 100 percent), and Austria and France (39 percent). A decline of 100 percent means that the inflow of foreign capital completely stopped as a result of the crisis compared to the previous year.
In Central and Eastern Europe, only two countries escaped the decline, while most of them saw major reductions in capital inflow. In Slovakia, for example, foreign direct investment fell by 87 percent; in the Czech Republic, by 54 percent; and in Romania, by 56 percent. Meanwhile, besides Hungary, Poland was the only other country to buck the trend with a modest 9 percent increase.
Title image: The launch of new models at the Mercedes factory in Kecskemét, Central Hungary. (source: autogyar.hu)