Hungary is a lower middle income country located in central eastern Europe and has almost completed the changeover from a centrally planned economy to one that is market-based. When transition first began, Hungary had significant advantages over many central European countries including higher living standards and a pragmatic economic policy initiated during the communist period.
Economy
Hungary's economic growth has been slowing. Following a slight acceleration to four per cent in 2004, GDP has tailed off. In 2007, prior to the global financial crisis, growth had dipped to just 1.4 per cent. This came as a result of reforms dampening domestic consumption, one of the main catalysts for growth. As an economy that was already slowing, the effects of the global slowdown saw growth drop to just half a per cent in 2008.
The Economist Intelligence Unit expects the Hungarian economy to contract by six per cent in 2009 and one per cent in 2010, as fiscal austerity measures curtail domestic demand further. A modest recovery is expected in 2011, before a more vigorous return to growth in the following two years. As a result of the impact of the severe financial and economic crisis, the government announced measures in January 2009 aimed at addressing problem areas and spurring job growth. This included a pledge to cut payroll and social benefits. As yet these measures have yet to be detailed or implemented.
The new Prime Minister Gordon Bajnai, who was approved by parliament in April 2009, has promised further deep cuts in fiscal spending and the implementation of structural reform.
Investment Climate
Hungary is strategically located in Europe giving access to EU markets. It has a highly skilled and educated workforce, sound infrastructure and other advantages that have attracted many multinational companies to the country.
The Constitution guarantees private ownership, right of enterprise and freedom of competition and the government engages in reasonably transparent legislation. The Hungarian Investment and Trade Development Agency was set up in 1993 and continues to help companies looking to make major investments in the country.
Legislation is uniform for all investors regardless of origin and institutions and procedures are in place to ensure compliance with legislation and competition rules. The most notable legislation protecting both foreign and domestic investors is the Foreign Investment Act of 1998. This grants full protection to the investments and businesses of non- Hungarian resident investors and guarantees that investors will be treated in the same way as national investors.
Hungary acceded to the EU in 2004 and as a result the country has access to a number of union grants. These cash subsidies can be obtained through tender applications and are aimed at different development objectives such as business promotion, transportation development and human infrastructure.
The government has placed an emphasis on logistics and transportation as part of the EU funded New Hungary Development Plan, together with other areas that will continue to improve the country’s overall infrastructure, such as pollution control, renewable energy and healthcare.
Opportunities
The reputation of British companies is high in Hungary and the country offers opportunities in most sectors. Some of the more promising sectors are:
• Aerospace
• Agriculture
• Airport development
• Automotive
• Biotechnology
• Clothing, footwear and fashion
• Construction • Education
• Food & drink
• Healthcare
• ICT
• Power
• Railways
• Transport/logistics
Industry Sectors
Agriculture
Agriculture contributes just four per cent to Hungary's GDP, however, it is an important economic sector. This becomes more apparent when processing industries are taken into consideration, pushing the economic contribution up to around 12 to 13 per cent. The country's topography, fertile soil and favourable climate make it possible for outstanding results to be achieved. The sector employs more than 80,000 people, around three per cent of the labour force. The New Hungary Rural Development Programme was accepted in September 2007 and enables the country to make use of around £4.4 billion of EU funding to modernise agriculture and develop rural areas.
Other priorities include improving the environment and the countryside, quality of life in rural areas and diversification of the rural economy. This influx of EU money may mean additional business opportunities for UK companies.
Biotechnology
Biotechnology is one of the fastest expanding knowledge based high-tech industries in Hungary. This growth has included the launch of biotech knowledge centres. Many of Hungary’s top scientists are working in biotechnology. Affiliates of the Hungarian Academy of Sciences and by-laboratories at pharmaceutical firms and universities in Budapest, Szeged, Debrecen, and Pecs conduct research.
Most investment-intensive biotech research is affiliated with multinational biotech or pharmaceutical firms, but some small, private, Hungarian firms operate as well. Ten such companies have opened in the last two years.
UK Trading Relationship
Hungary is the UK’s third largest export market in Central & Eastern Europe. In 2008, the UK exported goods worth £983 million to Hungary. Over the same period the UK took imports valued at £2.4 billion from the country.
KEY FACTS
Official Name: Republic of Hungary
Capital: Budapest
Area: 93,030 sq km
Population: 10m (UN, 2008)
Major language: Hungarian
GDP (current): US$138.43 (World Bank, 2007)
GDP growth: 1.1% (World Bank, 2007)
GNI per capita: US$11,570 (World Bank, 2007)
Inflation (consumer prices): 6.1% (2008 est.)
Labour force: 4.2m (2008 est.)
Unemployment: 8% (2008 est.)
Monetary unit: 100 filler = 1 forint
Exports to UK: £2,491.64m (HMRC 2008)
Imports from UK: £984.03m (HMRC 2008)
Main Industries
Mining, metallurgy, construction materials, processed foods, textiles, chemicals, pharmaceuticals, motor vehicles.
Main Exports
Machinery and equipment, other manufactures, food products, raw materials, fuels and electricity.
Main Imports
Machinery and equipment, other manufactures, fuels and electricity, food products, raw materials.
CONTACTS
UK Trade & Investment
Kingsgate House
66-74 Victoria Street
London SW1E 6SW
Tel: 020 7215 4950
Email: colin.hosey@ukti.gsi.gov.uk
Web: www.uktradeinvest.gov.uk
British Embassy
Commercial Section
Harmincad utca 6
Budapest V Hungary
Tel: 00 36 1 266 2888
Email: commercial.budapest@fco.gov.uk
Web: www.britishembassy.hu
British Chamber of Commerce in Hungary
1137 Budapes
tSzt. István krt. 24. IV/3
Hungary
Tel: 00 36 1 302 5200
Email: bcch@bcch.com
Web: www.bcch.com
Embassy of the Republic of Hungary
Commercial Section
46 Eaton Place
London SW1X 8AL
Tel: 020 7235 8767
Email: office.lon@kum.hu
Web: www.mfa.gov.hu/emb/london
The Hungarian Investment and Trade Development Agency
Andrássy út 12
H-1061 Budapest Hungary
Tel: 00 36 1 472 8100
Email: info@itd.hu
Web: www.itdh.com
