Automobile industry produces 24 per cent of GDP

A conservative economist fears that Hungary is becoming unilaterally dependent on car manufacturing, and on offering subsidies and cheap manpower to foreign investors, in general.

In Magyar Nemzet, Professor Magdolna Csath warns that Hungary may easily find itself in trouble if demand for automobiles drops as a result of a major international financial crunch, since the latest statistics show a rapid increase in the share of car manufacturing in the national economy. While the automobile industry accounts for 24 per cent of GDP (up from 21 per cent three years ago), the shares of electronics and food processing have slipped. The reason why car manufacturers choose Hungary is the low labour cost and the substantial public subsidies they are offered by the government. However, Csath remarks, one new such job costs the budget 16 million forints, while in food industry or electronics, job creation would cost less. In those areas Hungary has also more competitive know-how and research and thus would have more added value to offer. Csath doesn’t mind if Hungary attracts foreign investors, but warns that the government should invest much more in human capital, meaning education and research, in order to become more competitive and less dependent on one or two particular industries.

Tags: human capital, industry, multinationals