Business is booming in Hungary
Big names like Spar, Decathlon, Le Coq Sportif, and high-end watchmaker Rolex are all investing in opening new stores or renovating existing property right across Hungary
Thanks, in part to measures the government has taken to ensure businesses succeed in the current economic climate, investment in Hungary is on the rise.
"Orbanomics" is certainly paying off. The sharp economic contraction of 2012 has turned into a solid expansion, the budget deficit is under control and Hungary is regaining its investment-grade credit ratings.
Businesses have grown exponentially as Hungarians have started spending again after severe belt-tightening following the 2008 global financial crisis.
Prime Minister Viktor Orbán embarked on his independent policy course shortly after coming to power in 2010. He imposed big windfall taxes on banks, energy, telecoms and retail firms and nationalized private pension savings of 3 trillion HUF.
Such unorthodox measures upset investors and brought him into conflict with the European Union, the International Monetary Fund and financial markets, but they also reined in the budget deficit and his measures have proved successful.
According to statistics released by the KSH, Hungary’s GDP is up and wages have increased by 7.5 percent this year.
International corporations have been attracted to Hungary thanks to the tax incentives offered to businesses, and the introduction of a 9 percent flat corporate profit tax rate will ensure Hungary becomes one of Europe's most important tax havens in 2017.
There are currently 800-900 companies in Hungary that pay 19 percent corporate profit tax. As a result of the new flat rate, they could save 132 billion HUF in 2017 and 140 billion HUF in 2018.
At the same time, smaller companies could save together 20-30 billion HUF in the next two fiscal years due to the one percent cut in their corporate profit tax rate.
Property prices are up, pension packages are better, healthcare and education are improving, and investment in retail has risen.
Businesses like Daimler, Becton Dickinson & Co and other leading international corporations have invested billions in their business in Hungary, while international relations with countries like Russia and China have resulted in further strengthening ties between the nations.
Big names like Spar, Decathlon, Le Coq Sportif, and high-end watchmaker Rolex are all investing in opening new stores or renovating existing property right across Hungary.
The opening of the new Rolex boutique on Andrassy Avenue, Budapest, in partnership with Petite Geneve Petrovic, is a sign of not only how big names are willing to invest in Hungary but also a reflection of how business is booming.
“Hungary has a bright future and that’s why we invest here,” Nikola Petrovic, head of Petite Geneve Petrovic, told Abouthungary.hu.
“We are very proud to open our new beautifully designed boutique on Andrassy Avenue, in such a wonderful city as Budapest, and to celebrate a successful 30-year partnership with the Rolex brand,” he added.
It’s luxury brands like this that are raising the standards in Hungary, and who are encouraging other businesses to follow suit by investing in a thriving economic climate.
Hungary’s economic gains have been impressive in recent years, due especially to the country’s ability to provide the talent sought by multinational companies and to provide incentives for businesses to succeed.
Foreign direct investment into Hungary was at the highest level ever last year, László Szabó, deputy minister of Foreign Affairs and Trade, said, “and it’s now tripling even that number.” In Eastern and Central Europe, Hungary trails only the Czech Republic in terms of foreign investment.
“We used to worry about how to find people for jobs,” he added, with the unemployment rate dropping from 11 percent at the time of the 2007-08 economic crisis to 6.2 percent last year. “Six years ago we had people looking for jobs, but today we have jobs looking for people,” the minister said.
He recalled that before the current government came into power in 2010, Hungary’s economy was worse off than Greece, which also had a huge national debt.
“Basically we decided to go unconventional by boosting the economy and not overextending the budget or national debt,” he said. The government lowered corporate taxes – a corporate rate of 9 percent is to go into effect in January – and increased consumption taxes.
Foreign investment was encouraged by streamlining the process of acquiring business licenses, a procedure that in the past took six to eight months and involved three government ministries now only requiring the approval of one ministry in two weeks or less.
At the heart of Hungary’s economic advances has been its inventiveness and the ways it has been able to adopt strict economic policies to achieve positive results. It is fair to say that "Orbanomics" is certainly paying off and business in Hungary is booming.