Hungary’s strong manufacturing sector and recent capacity expansion has turned it into a competitive exporter. As a member of the EU, Hungary benefits from relatively well developed institutions. Nevertheless, increasingly populist government policy has weighed on the business environment, while the country’s domestic demand recovery will trail that of its Central European peers due to a crippled banking sector and soft external demand.

We keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 19 of Hungary’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert teams. We aim to keep you ahead of the curve, so you can do business with ease in Hungary.

Country Risk

Hungary Country Risk

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Core Views

  • Having been propped up by fiscal stimulus in 2013 and 2014, real GDP growth in Hungary will slow substantially in the coming quarters as government spending is scaled back. Hungary's domestic demand recovery will trail that of Central European peers due in part to a crippled banking sector, while external demand will remain weak on the back of a stalled eurozone recovery.

  • We believe that the threat of EU structural funding cuts - which Hungary has become increasingly dependent on - will be sufficient motivation for the government to do just enough to keep the country's deficit within EU limits in the coming years. However, public debt will remain well above Emerging European averages and Hungary will remain in a precarious fiscal position with minimal resilience to shocks.

  • Hungary's current account surplus will remain sizeable...

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Hungary Operational Risk Coverage (9)

Hungary Operational Risk

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BMI View: Hungary offers a stable environment for international business, exhibiting low levels of crime and security risk. Threats from state or terrorist actors are low. We see the greatest threat stemming from criminal involvement in the formal economy, while occasional bouts of political unrest can disrupt business operations.

From a geopolitical perspective, Hungary is a very stable nation. The risk of interstate conflict is very low, mitigated by high levels of international cooperation. The terror threat is also low, as there are no international groups known to be operating in the country. Criminal risk presents the greatest security threat. Crimes against individuals are no worse than in other European countries, although we see increasing influence from criminal groups in the formal economy. This serves to lower Hungary's overall...

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Hungary Crime & Security

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Hungary offers a stable environment for international business, exhibiting low levels of crime and security risk. Threats from state or terrorist actors are low. We see the greatest threat stemming from criminal involvement in the formal economy, while occasional bouts of political unrest can disrupt business operations.

From a geopolitical perspective, Hungary is a very stable nation. The risk of interstate conflict is very low, mitigated by high levels of international cooperation. The terror threat is also low, as there are no international groups known to be operating in the country. Criminal risk presents the greatest security threat. Crimes against individuals are no worse than in other European countries, although we see increasing influence from criminal groups in the formal economy. This serves to lower Hungary's overall performance slightly, scoring 74.0 out of...

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Hungary Labour Market

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Incoming investors to Hungary can capitalise on high skills levels within the labour market. Moreover, if businesses cannot find the specialist workers they require, EU citizens can be employed without restriction. The downside risks to be aware of are low workforce participation rates and a minor disjuncture between skill-sets and labour market needs, which affects labour availability. Meanwhile, unions and minimum wage policy put upward pressure on labour costs, although Hungary remains competitive when compared to Western Europe. We do not see these risks as an impediment to private sector business however, and Hungary's popularity as a manufacturing and outsource destination is justified.  The Hungarian government has failed to resolve long-term unemployment and low labour force participation issues, which significantly limit labour supply. Labour tax rates are also unfavourable and increase labour costs in the country, which are...

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Hungary Logistics

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BMI View: Hungary is a strong performer in our Logistics Risk Index with limited risks to the country's supply chain. The transport network and international trade links are well-developed and boast respectable trade volumes, which are set to increase. However, the greatest logistics risks for foreign businesses relate to a high level of trade bureaucracy, overreliance on the road network for most of the country's freight traffic and the relatively limited radius of Hungary's supply chains, as the country is landlocked and lacks shipping as well as air lines. Therefore, Hungary scores 58.4...

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Hungary Trade & Investment

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Businesses considering entering Hungary will benefit from strong legal frameworks that support and protect international companies, as well as minimal trade barriers, a sophisticated financial sector, and low levels of red tape. The key downside risks include an uncompetitive tax regime which is discriminatory in some cases, tight controls on foreign currency loans, and high national indebtedness. Overall, Hungary remains a low risk investment choice, with net capital inflows through direct and portfolio investment channels.

Hungary is a key player in trans-European trade and is a well-establish foreign investment destination within the Emerging European region. It has achieved this through economic openness, low government intervention, and the development of a strong legal framework. As a result, Hungary has limited Trade and Investment risks, scoring 73.2 out of 100.

Hungary has a comprehensive legal framework that...

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Hungary Industry Coverage (19)

Autos

Hungary Autos

Commercial Banking

Hungary Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Hungary Consumer Electronics

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BMI View: The Hungarian economy has been a regional underperformer in recent years, and the outlook is expected to remain weak in 2015 and into 2016 as forint depreciation against the dollar is expected to dampen device demand. This is a shift from the positive trend in 2014 when booming tablet and smartphone sales, as well as the fact upgrade demand was brought forward by the withdrawal of XP support and the FIFA World Cup, drove overall growth. Although several macroeconomic indicators are expected to continue to strengthen in 2015, the depreciation of the forint against the US dollar will mean trading conditions remain challenging and we expect a contraction...

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Defence & Security

Hungary Defence & Security

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BMI View: Hungary acknowledges that its geographical position in Central Europe, bordering the Ukraine as well as the Balkans, presents some threats, as well as opportunities. Stability in Central and Eastern Europe and South East Europe, remains the top priority for Hungarian foreign and security policy.

Similar to other Eastern European countries, Hungary has had to deal with a significant transformation of its defence industry as a result of its post-Cold War democratic transition. Some companies such as Danubian Aircraft have been successful in this transformation. It has managed not only to recover from bankruptcy of its parent company PVG but also to participate in the operation of upgrading 14 Gripen and other aircraft for the Hungarian Air Force.

The armed forces suffer from budgetary constraints. Nevertheless, the...

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Food & Drink

Hungary Food & Drink

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BMI View: Although we now expect the Hungarian National Bank (MNB)'s base rate to remain fairly low through to the end of 2015, we see little to indicate that household spending will pick up significantly over the course of the year. While the country's economy will continue its gradual recovery, thereby supporting its food and drink industry, continuing unpredictable policy-making and high corporate tax rates have the potential to impact negatively on investment inflows.

Headline Industry Data

  • Total food consumption value (local currency) growth year-on-year (y-o-y) in 2015: +4.7%; compound annual growth...

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Freight Transport

Hungary Freight Transport

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Czech Republic's freight transport sector will continue growth in 2015 in line with the country's improving economic outlook, following a year in which BMI believes saw increases in volumes across the whole sector.

Total trade is projected to continue picking up in real terms, with our Country Risk desk forecasting a year-on-year (y-o-y) increase of 3.94% in 2015, following an estimated growth of 8.08% in 2014.

Road freight is continues dominating the sector and is projected to grow by 2% in 2015. To the end of our forecast period to 2019, we expect the sector to defy the European Union (EU) pledges of a decrease in road haulage across the region. That is not to say, however, that road freight's market share is completely safe.

BMI notes that rail is the likeliest candidate in Hungary's freight transport mix to benefit...

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Information Technology

Hungary Information Technology

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BMI View: The Hungarian Country Risk team's forecast for significant forint depreciation against the US dollar in 2015 weighs on our forecast for IT market growth. The Hungarian economy has been a regional underperformer in recent years, and the outlook is expected to remain mixed in 2015 and into 2016. However, IT market spending growth should strengthen as the economic environment improves, particularly in the latter years of our forecast. A stronger economic backdrop will enable vendors to tap into the potential presented by relatively low penetration rates...

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Infrastructure

Hungary Infrastructure

Insurance

Hungary Insurance

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BMI View: Long standing challenges such as lack of affordability and customer understanding continues to restrain the life insurance segment in Hungary, and will likely do so through the forecast period. Tax breaks for pension products that have been available through 2014 have been positive - but not a game changer for the life segment. The non-life segment will continue to be held back by overcapacity (with the consequent downwards pressure on prices) and the slow real growth of the economy: these challenges will persist through 2015 and on to the end of the forecast period. While many of the players are successfully defending profit margins through control of costs and enhancements to operational efficiencies, we continue to believe that some will rethink their commitment to the Hungarian insurance sector.

As is the case for a number of national insurance markets in Central and Eastern...

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Medical Devices

Hungary Medical Devices

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BMI Industry View: The Hungarian medical device market is expected to fall by a CAGR of 0.4% over the 2013-2018 period, although the growth rate in local currency terms is more encouraging at 3.1%. Hungary is heavily reliant on imported medical devices despite a growing domestic industry. Manufacturers tend to concentrate on exports, most of which are shipped to Western Europe. The comprehensive public hospital sector and expanding private sector...

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Oil & Gas

Hungary Oil & Gas

Petrochemicals

Hungary Petrochemicals

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BMI View: The Hungarian petrochemicals industry remains an outperformer in Central and Eastern Europe. Steady growth in output was reported for 2014 and we are optimistic that future growth will support continued expansion of capacities over the forecast period (to 2019).

The automotive industry is playing a major part in the country's plastics and rubber growth story with petrochemicals investment largely targeting the automotive supply sector. Production capacity in polyurethane used for car seating and synthetic rubber for tyres have has grown strongly with projects continuing to boost output. Hungary is highly specialised in the production of isocynates, used in the...

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Pharmaceuticals & Healthcare

Hungary Pharmaceuticals & Healthcare

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BMI View: Hungary's pharmaceutical market will stabilise and grow slightly in 2015. The challenging operating environment, regulatory burden and punitive taxes on the pharmaceutical sector will continue to stunt growth. Pharmaceutical growth in local currency terms will be driven by consumer demand for over-the-counter medicines and greater uptake of generic medicines.

Headline Expenditure Projections

  • Pharmaceuticals: HUF579.14bn (USD2.50bn) in 2014 to HUF590.49bn (USD2.31bn) in 2014; +2.0% in local currency terms and -7.9% in US dollar terms.

  • Healthcare: HUF2,191bn (USD9.47bn) in 2014 to HUF2,232bn (USD8.72bn) in 2014; +1.9% in local currency terms and -7.9% in US dollar terms.

...

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Power

Hungary Power

Real Estate

Hungary Real Estate

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BMI View:  A healthier economy has helped provide greater stability for the Hungarian commercial real estate sector during recent months with strong levels of internal and external demand creating a stable footing for demand for rental space and investment. The mood has since begun to sour, however, as economic growth has begun to waver and the central bank has taken measures to support the market.

An acceleration in Hungary's GDP proved the catalyst for the commercial real estate market during 2014 following a prolonged period of stagnation and contraction in rental rate costs across much of the market. The year saw rental rates remain on a stable footing as both internal and external demand trended upwards. Meanwhile, the market saw a substantial increase in investment with transactional activity forecast to have grown by 135% over the full-year on a year-on-year (y-...

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Retail

Hungary Retail

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BMI View: Hungary boasts one of the most competitive and developed retail sectors in Central and Eastern Europe (CEE). It has a significance presence of foreign retail chains as well as strong domestic retailers. However, major foreign retailers face challenges on the back of recent laws passed by the Hungarian government; and market power is likely to shift towards the domestic retail chains. Meanwhile, household income is forecast to rise along with the country's urbanisation rate, creating opportunities for investors.

The Hungarian economy has been experiencing turbulent times over the past five years. GDP saw both positive and negative growth and ended the period with higher than expected positive growth in 2014. This growth is expected to help the government plan its expenses for 2015 more easily, with the budget deficit set to decrease to around 2.6% of GDP. However, the country is facing the threat of...

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Telecommunications

Hungary Telecommunications

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BMI View: In 2014 Hungary underwent its first large scale 4G spectrum auctions, which saw nine blocks of bandwidth divvied up between four network operators. Alongside incumbents Telenor , T-Mobile and Vodafone , the telecommunications regulator NMHH also licenced a new market player Digi . BMI believes that while Digi's entrance will have a limited impact on the Hungarian mobile market, the auction will spur 4G and mobile data usage growth. Meanwhile, in the wireline segment, it is believed that...

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Tourism

Hungary Tourism

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BMI View: Hungary's tourism industry is expected to record positive growth over the 2015-2019 period, with solid expansion projected across a range of key market indicators. Tourist arrivals in particular are expected to experience strong growth. However, this growth will be highly dependent on the stability of the eurozone and key European source markets, on which Hungary relies for almost 90% of tourist arrivals.

We expect to see healthy growth in Hungary's tourism market over the 2015-2019 period, driven by solid domestic economic growth and an increasing proliferation of low-budget...

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Water

Hungary Water

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BMI View:  This quarter we have updated and expanded our water forecasts for Hungary, adding in new lines of data, including type of water source. We have substantially upgraded our treated wastewater forecasts based on improved government investment into advanced treatment facilities, and we continue to view the mains and sewage networks as the key future development areas, with losses remaining high, and a significant portion of wastewater not being collected.

The establishing of five regional utilities and over 400 municipal utility companies in the post-Soviet era, and the implementation of water charges being related to delivery costs resulted in a decentralised and incoherent water sector, with each individual municipality having autonomous control. This in turn led to inefficient and frequently overpriced water services. In addition, the maintenance and modernisation of networks was...

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