Experimental statistics

Released: 9 October 2024

Construction performance is highly dependent on the overall economic environment, and belongs to the sections which react on a broad scale to changes in economic circumstances, by quite a high volatility. The performance of construction determines construction investments, this is why it is in the closest relation – among the GDP utilisation items – with gross fixed capital formation.

Construction output volume almost doubled in Hungary between 2013 and 2020, being positively impacted by the overall economic prosperity starting after 2012 and lasting until the onset of the Covid pandemic. The bulk of the growth fell on the end of the period, to 2017–2019, when the increase in dwelling constructions, investments in infrastructure and industry shot construction up, too. Production grew once again in 2021 and 2022, following the stoppages and uncertainties caused by the pandemic, but decreased in 2023. This trend is linked to downturns in state and market orders, as well as to increasing construction costs and growing – turning financing more expensive – interest rates. One of the main reasons of all of it was the Russian-Ukrainian war.

The weight of construction in the national economy does not show significant differences when comparing Hungary with the EU, however ours is on average higher than that of the EU (looking back more than two decades, it was between 4–7% in Hungary and 5–6% in the EU). Its proportion shows similarities with the neighbouring countries as well, being somewhat higher in Romania, Austria and Serbia, while Slovenia, Slovakia show identical results with Hungary. Territorial concentration of the section is slightly lower than the EU average.

Construction value chain length, measured as the ratio between gross fixed capital formation and output, is about the EU average since the turn of the millennium, showing values between 36% and 41%. The country’s value chain length decreased, as did the EU average one, however it is higher than the average. Construction output in Hungary (similarly with the industrial one) is less concentrated territorially compared to the EU average. Traditionally, construction primarily satisfies domestic demands, its production capacity utilizes internal resources, as such no significant differences occurred in the value chains of the individual countries. Within the European Union the longest construction value chains are in Germany (44%) and Lithuania (45%).

Relative shorter value chains observed in the divisions of construction may indicate import-dependency on merit or high producer prices, both of these holding characteristically the economy’s value-added capacity back. Decreasing import dependency as well as the network-development of domestic suppliers participating in production may increase value chain lengths, and, as such, could improve the value creating capacity of production divisions and strengthen the basis of economic growth.

State of construction

The weight of construction within the national economy is similar in most EU member states, in the European Union as a whole, and in Hungary: taking the EU average into account it represented 5–6% of the gross value-added between 2000–2023; this ratio fluctuated in Hungary between 4–7%. The role of construction is somewhat more accentuated, as more than 8% of all employees, 391 thousand people worked in Hungary during 2023 in this field. Although the weight of construction – regarding both value-added output and employment – is significantly lower (about one-third) than that of industry, when considering total output its proportion is larger, it was 36% in 2022 (industry, on the other hand, had a 21% share). This result is interesting, as material requirements are significant in construction and in consequence the proportion of intermediate consumption (with value-added giving the output) could be reduced only moderately. Industry and construction differ in organisational background, too: while industrial sales revenues concentrated in 2022 in 73% at enterprises employing at least 250 people, further 16% at medium size enterprises (50–249 employees), at the same time small enterprises, employing fewer than 50 people produced 65% of all sales revenues in construction. Earnings differ, too: monthly gross earnings of full-time employees reached HUF 443 thousand in 2023 in construction, being below the national average (HUF 571 thousand), the HUF 618 thousand average earning in industry was above it. Two-thirds of employees were blue-collar workers, one-third white-collar ones in both fields, however average earnings in industry were about 40% higher in both groups (HUF 502 thousand and 845 thousand) than in construction (HUF 362 thousand and 599 thousand).

Construction output volume reached once again the pre-regime change level by the end of the 1990s, then continued to increase up to 2005. The dynamic growth in construction broke in 2006 and fell overall by more than 40% by 2012. The economic boom that followed and went on until 2020 had a positive impact on construction, too, its output volume almost doubled during these seven years (considering the 2016 transitional setback, too). The bulk of the increase fell on the end of the period (2017–2019), when the upturn in dwelling construction, infrastructural and industrial investments added to construction. Following the stoppages and uncertainties owing to the pandemic construction output was once again, in 2021–2022, similar to the intensity of the 2019 peak, then it decreased in 2023. This trend is linked to downturns in state and market orders, also to increasing construction costs and growing – turning financing more expensive – interest rates. (One of the main reasons of all of it was the Russian-Ukrainian war.)

The performance of construction widely depends, overall, on the general economic environment, and belongs to the sections which react on a broad scale to changes in economic circumstances, by quite a high volatility. The performance of construction determines construction investments, this is why it is in the closest relation – among the GDP utilisation items – with gross fixed capital formation.

Territorial concentration of construction output

According to the topological map¹ the European Union region producing the largest gross value-added in construction is Madrid, the capital of Spain. When considering candidate states and EFTA ones, too, then the Turkish Istanbul region is on the first place. The regions of large cities’ agglomerations (those of Stockholm, Barcelona, Milan, Berlin, Roma, Helsinki) show, primarily, the highest gross value-added values. The division of the European Union is basically a West-East one, as only capital cities display higher values in the Eastern regions.

The proportion of construction in the European Union is 5.4%, while in Hungary it is above 6%. By this, Hungary is on a similar level with the neighbouring countries, Romania (7.0%), Austria (7.1%) and Serbia (7.2%) is slightly higher, while Slovenia and Slovakia show identical ratios with Hungary. The bulk of regions with high construction proportion in gross value-added total and high gross value-added compared to the EU average are in France, in the Benelux countries as well as in the Scandinavian ones. In contrast, the majority of the Baltic regions, the Portugal and Romanian ones perform in both aspects below the EU27 average.

Different regions participate unevenly in the construction output of a country. Certain regions are developing centres, while others may have a low construction presence, being dominated by other economic divisions. Accessibility, natural geography, social, functional, development level, historical aspects may play a part in the development of centres.

While 10% of the EU regions with the highest construction value-added produced 41% of the total, 20% of these gave 57%, in Hungary 10% of them (Budapest and Pest county) gave 40% of the total value-added, 20% (Budapest, Pest, Bács-Kiskun, Fejér counties) produced 53% of it.

Compared to the national average of value-added in construction, Budapest and Pest county had a somewhat larger share in the construction of dwellings group, giving 44% of the total, while this value was 40% at national level.

The concentration of construction output by countries may be compared based on Figure 5, showing the Gini concentration index² values. Construction output is distributed most evenly in Slovakia (Gini=0.13), besides Ireland, Denmark, Czechia, Poland show relatively low territorial concentrations in construction. Portugal and Bulgaria have the highest construction concentration levels (Gini=0.67 and 0.68). The average EU value is 0.53, Hungary’s is about 0.43, showing a lower concentration level as well.

Construction output in Hungary is less territorially concentrated (just like industry) compared to the EU average. The Lorenz-curve³ shows data on deciles modelled on the basis of construction gross value-added in the European Union NUTS3 level regions⁴ (the counties in Hungary), which signal a higher territorial concentration on EU level than in Hungary (figure 6).

Territorial concentration in Hungary changed during the last more than twenty years, as shown in Figure 7. Changes of two indices may be seen on the graph, on one hand the value of the Herfindahl–Hirschman index considering the current price-based construction value-added of the capital and the 19 counties, on the other hand changes in the proportion of value-added of Budapest and Pest county.

The territorial concentration of construction value-added in Hungary decreased up to 2015–2016, it is constantly growing ever since. (Figure 7)

Construction value chains in Hungary and in the European Union

The production and output of organisations on one hand and input value (fuel, base materials, etc.) of the intermediate consumption for producing these goods and services on the other define gross value-added, new value creation in construction. Gross value-added is the difference of these two.

It can be seen, by the regional comparison of the value chains⁵ measured as gross value-added and output quotient that in the case of Hungary, Slovakia, Poland the ratio between construction value-added and output is about the same, close to the EU average (Figure 8). This is mainly due to the fact that construction primarily satisfies domestic demands, its production capacity utilizes internal resources, as such no significant differences occurred in the value chains of the individual countries. Import demand arises mainly for construction materials and qualified workforce. The longest construction value chains within the European Union are in Germany (44%) and Lithuania (45%).

When comparing the Visegrad countries, the index of Slovakia significantly deviated from the region’s countries as well as from the EU average between 2008 and 2018. This is mainly owing to the fact that construction output fell by 17.6% between 2007 and 2012, while construction value-added grew by 6.1%, as such the ratio of value-added and output significantly grew. Output increased by 41.6% between 2013 and 2018, while value-added grew by 12.8%, in consequence the ratio returned to the EU average.

The proportion of construction value-added and output in Hungary – as in the EU member states –has a decreasing trend, even so it is higher in Hungary than the average. Value chain length may be impacted by several factors, first of all the proportion of internal and external resource utilisation by output.

The state is the largest procurer in construction⁶, so in case of finalising or stoppage of investment projects of the state, participation in foreign procurers’ projects mean the only safe investment. Foreign investors, however, bring often along their contractors, too (especially true in case of Chinese, South Korean or even Turkish projects), and leave domestic resources – construction products, contractor capacities, workforce – out. On the other hand, building and construction materials’ modernisation means that a significant part of base materials, manufactured goods and technical equipment used in construction is import-dependent, which may lead, as well, to domestic value-added lessening. This, in turn, may result in a decreasing trend in the value-added and output ratio. The phenomenon is not singular, Polish indices show similar trends.

Relative shorter value chains in construction could indicate import dependency in merit or high producer prices, these reducing, characteristically, the value-added producing capacity of an economy. Decreasing import as well as the development of domestic suppliers’ network may result in longer value chains, leading to the improvement of manufacturing divisions’ value creating capacity and the strengthening of the foundation of economic development.

Change in value chain length may be impacted, beside volume- and price changes, by the composition-effect, too. If production shifts toward subsections with higher- or lower value-added content it does not mean a significant change regarding the value chain length of the overall construction, but it is a composition-effect. There are three construction subsections: the construction of buildings, civil engineering works and specialised constructions. The latter has the highest value-added content, which is somewhat lower in case of the construction of buildings and the lowest in civil engineering works. The analysis of value-added content and its change by filtering the composition-effect (presuming a constant output-distribution among enterprises) reveals that major changes are not caused by the composition-effect; in certain years, however, its impact is detectable, e.g. in 2021–2022 when standardised value was lower than the actual one, meaning that output proportion shifted, in comparison with 2020, toward subsections with a higher value-added content. The 0.2 percentage points growth in value-added content, from 2020 to 2022, is not a factual change, rather the result of the composition-effect (Figure 10).

Price ratio changes⁷, too, played a major part in the 2021–2022 significant value-added content fall in industry. It was different in construction, no major changes occurred, however quantity and price changes are worth observing.

Price levels in industry, regarding intermediate consumption grew significantly more in both years than those of value-added⁸, this is why value chain length calculated based on current prices data decreased due to price changes, too. In contrast, the value-added price level in construction grew more in 2021 than that of intermediate consumption, intermediate consumption became in 2022 more expensive, just like in industry. The dynamics of volume change is different from that of the industry, the value-added volume increasing more in both years than that of intermediate consumption, meaning that material intensity of production lessened.

The balance of divisions' connections (input-output tables) is the adequate tool for value chain analysis, as it can present, beside direct consumption the cumulative (the sum of direct consumptions cumulated due to direct and ripple effects) consumption, too. A symmetrical input-output table is produced every 5 years, the most recent one refers to 2020. Basically, the input-output table shows the so-called technological connection system of the economy, changing very slowly in time, as such the 2020 version is valid even today.

The multiplier shows how much domestic output is being generated by producing 1 HUF value-added, by considering ripple effects, too. Basically, two factors impact this process, import-demand of production (the larger the import demand of a process the less domestic output is generated) and the value-added content (the higher the value-added content the lower the proportion of intermediate consumption and the ripple effect). Import content is lower, value-added content is higher in construction than in industry, however, the impact of the low import content is more significant and the resultant of these two factors is a much higher ripple effect in construction than in industry (where is basically identical with the national economy’s average).

Direct and cumulative import content is important and interesting in itself, in industry being very high, the import content of 1 HUF output is 0.5 HUF, and owing to ripple effects an additional 0.08 HUF is added to it, meaning that import material utilisation is decisively directly included in the value of products in industry. Even if direct import content is lower in construction, 0.21 HUF being incorporated in 1 HUF output, indirect import is higher, meaning an additional 0.14 HUF.

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