Hungarian economy remains crisis-resistant

No crisis could prevent Hungary from boosting investment and job creation, which we firmly believe are the pillars of a resilient economy.

“We are living in a decade of danger, uncertainty and war, and our ability to see the future is limited,” Prime Minister Orbán said in Tusványos, adding that “there is an economic crisis and war inflation.”

It is difficult to remain optimistic in these troubled times, but the Hungarian government is doing its utmost to continue to deliver on its economic policy goals of sustaining growth, low unemployment and keeping Hungary an attractive investment destination. In contrast to the passivity of governments before 2010, the current government’s responses to crises have so far allowed us to emerge stronger each time, and we are now confident that we can be “the local exception in the global recession,” as expressed by the prime minister.

In terms of investment, one has only to look at the developments of the past few weeks to see that Hungary remains an attractive destination for foreign investors.

One of our outstanding strengths is the automotive industry: The sector’s output grew to HUF 9.4 trillion in 2021 from 3.6 trillion in 2010; moreover, it has recorded HUF 4.5 trillion just in the first five months of 2022. The sector employs 155,000 people and Hungary, ranked 95th by population, is the world’s 20th largest auto exporter. 

Our recent announcements in this regard include Mercedes-Benz’s mega-investment of new production lines worth HUF 400 billion in Kecskemét, central Hungary, and Chinese automotive company NIO’s plans to build a plant for its battery replacement stations worth HUF 5.5 billion in Biatorbágy, near Budapest, creating several hundred jobs.

Another recent investment is aircraft manufacturer Diehl Aviation’s new factory worth HUF 2.5 billion, which after 10 years of presence in Hungary believed that the domestic business environment is appropriate for expanding their manufacturing capacity here.

Hungary’s efforts to provide an ideal business environment have been recognized on several international fronts: A few days ago, Fitch Ratings affirmed Hungary’s “BBB” investment grade rating with a stable outlook, while several other countries in the region have been downgraded. The agency also regards Hungary's growth prospects as strong compared to similarly rated countries and expects the economy to grow by more than 5 percent.

At the EU level, the European Commission has also revised its forecast for the Hungarian economy’s performance in 2022, expecting growth to reach 5.2 percent instead of the previously estimated 3.6 percent.

Our recipe remains the same: keeping taxes low and taking measures to prevent unemployment and avoid austerity. Our unemployment rate remains one of the lowest in the European Union. This June, the number of people employed rose to a record high of 4,739,000, whereas the unemployment rate fell to below its pre-pandemic level.

In terms of taxation, the government decided to reduce the administrative burden on businesses via a new provision that allows companies operating in Hungary to pay their corporate and business taxes in forints, euros or US dollars, helping them to simplify their tax administration if they earn their income in a foreign currency.

As for the future, we are facing difficult times due to the energy crisis and war inflation, but we want to continue to implement crisis-resilient economic policies, as we have done in the past. Our standpoint is that the Hungarian economy must stand its ground in a wartime crisis, stability must be preserved, and jobs must be protected while securing the country’s energy supply.