Hungary

Find out more about Hungary and some of its major investments.
Discover more about the investors and investment sectors within this West European country.

Economic History in Brief

Hungary is a country located in Central Europe with a population of around 9,797,561 people. It stretches across an area of 35,920sqm and is bordered by Ukraine, Austria, Romania, Serbia, Slovakia and Croatia. Hungary’s capital and largest city, Budapest, is classified as a top international city and an economic hub. It boasts a high standard of living and is an OECD high-income economy.

After centuries of being inhabited by Romans, Celts, West Slavs, Germanic people, the Huns and Avars, Hungary’s foundation was laid in the late 9th century. By the 12th century Hungary became a middle power within the Western world and by the 15th century, the country reached a golden age. Although Hungary is yet again considered as a middle power in the 21st century, it has the 57th largest economy by nominal GDP in the world. It is the 35th biggest exporter of goods in the world and the 34th biggest importer. In 2004 Hungary joined the European Union and in 2007 it became part of the Schengen Area. It is a member of the Council of Europe, the World Bank, NATO, WTO, United Nations and the AIIB. Hungary also ranks 20th in the world when it comes to quality of life.

Prior to World War II Hungary mainly relied on economic growth through land cultivation. After the war, the country aggressively pursued industrialization under communist rule. Although the company’s strategic location in the middle of Europe was ideal for foreign trade, the rapid industrialization pushed for a more self-sufficient economy. Because of this trend, Hungary was dominated by state-owned enterprises. After 1968 the pioneering ‘New Economic Mechanism’ was launched. This initiative overhauled the economic system, encouraged the private sector to grow and for the economy to be decentralized. From this point onward Hungarian trade started being less geographically restricted, and the range of exported products started growing exponentially. The ‘New Economic Mechanism’ soon gave Hungary the boost required to become one of the most economically healthy countries in the region.

Investment Opportunities

Although growth has slowed in recent years, Hungary continues to hold significant investment value. Some of the main industries in the country are construction materials, mining, metallurgy, chemicals, pharmaceuticals, textiles, processed food and particularly vehicle manufacturing. Hungary is also a leading producer of equipment for the information technology sector, including mobile technology and information security, with exports of close to US$20 billion annually. Since 2017 it has enjoyed a competitive tax system involving a flat corporate income tax rate of 9%.

Companies Investing in Hungary

As one of the forerunners in Central Europe in renewing investment relations with China in the early 2000s, Hungary has enjoyed significant investment from China. Around 75% is through the acquisition of Borsodchem, a Hungarian chemical company bought by Wanhua Group. In 2018 Chinese company Zhejiang Kaishan Compressor Co. agreed to build a HUF45 billion geothermal power plant in Hungary. Shortly after the announcement was made, it was also announced that talks about launching direct flights between Shanghai and Budapest.

Indian conglomerate SRF announced in June 2018 that it would invest around EUR60 million to build a film factory in Hungary. South African Brewer SABMiller controls as much as 30% of the beer market share in Hungary and NEPI Rockcastle, a South African commercial property investor, bought one of the largest retail centres in Budapest. In total, South Africa has invested around US$350 million in Hungary. Not to be left behind, the United States remains the largest investor in Hungary outside of Europe. With a total investment of more than US$9 billion, 17,000 American companies employed 100,000 people in Hungary. Companies with strategic investment agreements include Alcoa, BorgWarner and IBM. Other investors include Huawei, Lenovo, Sevenstar Electronics, ZTE, Canyi, Xanga, Orient Solar, Comlink and BYD Electronics.

Investors with Interests in Hungary

Founder and managing partner of Future Perfect Ventures (FPV), Jalak Jobanputra is known for her interest in making technological investments in Hungary.

Conclusion

Because of its favourable location, Hungary is not only accessible to the four main European transport corridors; it is situated at its crossroads and has one of the highest motorway densities as well as five international airports. Hungary’s competitive tax system includes main rates of 2% maximum local business tax, .3% innovation contribution, 27% general VAT, 18% reduced VAT (accommodation, internet and necessities like bread and milk), and even tax exemption for certain services. There is also a range of subsidies and incentives made available by the government with the aim of increasing competitiveness. Hungary has a highly qualified workforce of over 4.5 million people available at a reasonable cost. As a member state of the European Union, Hungary is harmonised with European law and an investor-friendly legal environment. With a relatively stable economy throughout the 21st century, Hungary continues to be one of the leading nations in attracting foreign direct investment (FDI) in Eastern Europe – despite slowed growth.