The COVID-19 pandemic is an unprecedented shock not just to our everyday lives but also to the global economy. Its effects are more severe and extensive than we can imagine.
In Hungary, some of the key sectors of the economy like tourism, industrial production, and automotive industry have been hit hard. We could say that the complete stop of tourism is one of the most affected areas, but countless other sectors have been impacted as well. Many things changed at the beginning of 2020, and during only a few weeks, the decline in the economy has been equal that of the global depression of 2008-2009 measured in 3 years.
The effect of COVID-19 on Hungary and the global economy in terms of unemployment
COVID-19 has impacted not just the Hungarian economy but that of the world. Industrial production experienced great difficulties as China, being the World’s Factory, closed down. 75% of companies worldwide have a direct or indirect connection to China. As the supply chain starting from China has been interrupted, many industries could not get their raw material supply, which, therefore, affected their production and sales.
Due to the economic downturn, the livelihood of people has been unstable. In the past year, there have been significant reductions in income and a rise in unemployment due to the disruption in supply and demand, especially in the most affected areas like transportation, service, manufacturing industries. Some say that the data measured today is similar to the ones in 2008-2009.
In Hungary, the number of unemployed people grew by 46000 by the end of 2020, meaning the unemployment rate increased to 4.3%. This is a total of 10000 registered job-seekers and 36000 individuals who lost their jobs.
In Germany, December statistics indicate that unemployment reached 6.1%, which is not the end of it, unfortunately. The German government is expecting a continuous rise in this number due to the lockdown measures.
GDP of Hungary and the budget deficit.
In terms of GDP in Hungary for the year 2020, the economy shrank by 5.1% compared to 2019’s 4.9%. The previous three years have been successful and prosperous in our country with a GDP fluctuating between 4-4.9%. However, COVID has stopped this growth, and it is expected that we can only start proper recovery starting from the second half of 2021 and achieve full recovery by 2023.
The Hungarian budget was the second-lowest of all times in June 2020 with 785,5 billion HUF, but the previous months’ deficit was also significant. By the middle of 2020, the deficit was 1837 billion HUF, 5x than what the government budgeted.
The pandemic and the automotive industry
The pandemic has had a severe and swift impact on the automotive industry as well. This is considered a global sector, as different parts of a car are manufactured by different companies worldwide. Many companies’ supply chains have been disrupted due to disruption in China’s export, and only those companies could stay afloat who had plenty of back-up parts and materials.
Sales in the global auto industry have suffered greatly due to the lockdowns causing interruptions in manufacturing. The demand in car purchasing also decreased owing to the increase in unemployment, lesser incomes, and the fact that people are now working from home and can not travel or go out of their houses due to restrictions. In Europe, the sales in the car industry decreased by 24.6%, meaning a total of 15.5 million cars sold, meanwhile in Hungary in 2020, this decrease is 50%.
What can we expect from the future?
The future of the automotive industry is very uncertain, and we can find several adverse outcomes on different platforms. However, this should not come as a surprise. The car industry has shown a decline in sales during the past few years. For example, before 2019, car manufacturers closed with 5-10% fewer sales which meant an 11% decrease in their operating results on the global market.
The vehicle industry in Germany is one of the key sectors and has been struck by the pandemic. This sector and industrial manufacturing and other areas showed a negative turn with a total decrease of 17% in its production.
Experts see 2021 as a better year and expect a growth of 5% in Germany’s electronic and industrial manufacturing. However, one primary condition of this growth is that coronavirus does not affect and disrupt supply chains and production in order to restore the global economy.
Vaccines play a significant part in the rehabilitation of the economy, and we are hopeful that vaccinations will be successful sooner rather than later. We are hopeful that in the next year most sectors will be able to rebound quickly; however, experts suggest that international tourism and related sectors will need a longer recovery time.