Hungarian and Polish industries are frozen in recession. In Hungary, the lack of factory activity is forcing companies to lay off people in increasing numbers, and where new investments are coming there are fears that foreigners will be hired.

In the middle of summer, Polish industry is frozen. July was the 27th month in a row in which factories reduced their production. New orders have been coming down continuously for 29 months. The number of factory workers continued to decrease. And exports are declining, shows an analysis by S&P Global. Polish business, the largest economy in Eastern Europe, is in its longest recession since at least 1998, the year S&P began collecting such statistics.

The fact that the declines have decreased gives some hope. But other data is even more depressing. Inflation is accelerating as the new government reduced the shield to protect households from high energy prices, while the demographic crisis deepens. In Hungary, where the industry is very dependent on the car sector and Germany, it is worse. Analysts say that the Hungarian economy has reached a point where it needs incentives, but the government in Budapest has run out of money.

It has a large loan of 10 billion euros in Russia and recently received a large loan from China as well. Hungary has brought together the three main German car manufacturers and the main electric battery manufacturers in Asia in a big bet on green energy and electromobility. But the trend has slowed, the electric car buying fever has subsided, and Hungarian car factories are facing problems. One result is the increase in layoffs and the number of unemployed people, which in the first quarter was 10% higher than in the same period last year.

But the pace of layoffs is alarming even compared to the last quarter of last year. Thus, in the first three months of 2024, 229,000 unemployed were registered in Hungary. In the last three months of 2023, the number was 219,000, as reported by Penzcentrum.hu. Most of the unemployed are in two counties in the north-east on the border with Romania, Ukraine and Slovakia. Experts say the recession that lasted more than a year is to blame. Due to lack of activity, businesses go bankrupt, restructure and downsize their workforce. At the same time, the number of newly established companies and jobs is decreasing. Around 20,000 companies went bankrupt in the first semester of this year.

The main concern is the ice in the manufacturing industry. For a time, the economy, which has long faced a labor shortage, was able to absorb the unemployed workers. But as the business recession continues, the labor market can no longer hire those who have been left unemployed. Another situation that worries analysts is that the number of new investments is decreasing, so is their number and, worse, the big investments that have been announced are delayed. The best example is the electric battery sector, hampered by the decline in the electric car market. The Hungarian government made many plans based on the additional economic activity that the new factories would bring.

“At the moment there is no demand for the tens of thousands of workers that would be needed for the mentioned investments in the battery industry in Hungary, but even if some projects were to start, in many cases there would be foreign workers included,” explained József Nógrádi, commercial director of the Trenkwalder consulting company. Under these conditions, it is not surprising that when the newspaper Handelsblatt, Germany’s Financial Times, wrote that the German car giant Continental planned to eliminate 7,000 jobs worldwide, it did not spend a site Hungarian news Telex any time and asked the company what they plan to do with it. the factories in Hungary.

Continental has six plants there and a research and development center, employing more than 8,000 people. In response, the company clarified that the restructuring plan will not affect the Hungarian subsidiary. Portfolio writes that the global battery industry is in crisis due to excess production capacity, reduced demand and falling prices, but also because the global market is 50% occupied by just two players, CATL and BYD, from China. Such leadership spoils the competition.

Both companies announced factories and investments in Hungary. But the crisis in the industry is very sick for the Hungarian economy, Pasan notes. The latest statistical data shows a 5% fall in industrial production in May, on an annual basis. Orders fell by 24%, mainly due to lower demand for exports. Saving the economy may not come from increased consumption. Figures from the Hungarian National Bureau of Statistics show that turnover in the retail sector in June decreased by 0.1% compared to the previous month (but rose by 2.6% year-on-year). Although salaries have increased by 10%, the population is still careful when spending.