... the power sector in the coming 10 years will be one of the driving forces for the Polish construction sector, similar to the role of road construction projects nowadays.
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"In my opinion PMR is an excellent company and I would have no hesitation in recommending their services. [...]"
Commercial Director, Leading cartonboard merchant
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We are a member of the Society of Competitive Intelligence Professionals (SCIP).
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We are a member of the European Association of Opinion and Marketing Research Professionals ESOMAR.
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| Why to enter this market? |
- Fifth highest GDP per capita in the region
- Developed infrastructure
- EU membership
- Educational and R&D base
- Relatively low employment costs
- Skilled workforce
- Accessibility of EU funds
- Strong domestic market
- Existing supplier base
- Industry tradition
- Proximity of Austria, Czech Republic, Slovakia, Romania and Balkans
- Corporate income tax rate at 16%
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Economical and Business Environment
The business environment in Hungary is favourable in terms of paying taxes, as the country offers relatively low corporate income tax rate of a mere 16% and the VAT rate at the level of 20% and 5% while the personal income taxes provide two tax bands of 18% and 36%. When compared to other countries in Central and Eastern Europe low tax rates are one of the biggest advantages of Hungary in terms of doing business, especially if the fact that Hungary is member of the EU and a stable democracy despite of the occasional political problems.
In the period between 2000 and 2008, the annual GDP growth in Hungary averaged nearly 4%, however, the forecasts for 2009 and 2010 assume that economy will decrease by 6.2% and 2.3% respectively. This will be a continuation of the economy slowdown started in 2007 when the GDP growth reached its minimum of just 1.1% and witnessed also in 2008 hitting the 0.5% growth value. Partially those problems were caused by the uncertain situation of the government resulting in lower value of the foreign investments and slow-down of the domestic demand. To accelerate economic recovery major development programmes have been launched by the government partly through European Union funds. EU subsidy of 22.4 billion Euro will be available to Hungary until 2013. The country has never before had an opportunity for targeted development on such a scale throughout its history. Despite all those aid it will still take some time until the 5.2% GDP growth rate of the year 2000 will be recorded again.
The inflation rate in Hungary declined substantially at the beginning of this decade, from 14% in 1998 to 3.9% in 2006. However, as a result of higher taxes and food prices increase, inflation in 2007 increased to 8.0% and to 6.2% in 2008. The forecasts for the following years show that the inflation rate will decrease to the level of 3.9% in 2009 to drop to the level of 2.6% in 2010. On the other hand the contraction in the GDP growth will have a positive impact on the inflation level.
The Hungarian currency is fully convertible since 1996. The exchange rate of the Hungarian Forint (HUF) remains relatively stable when compared to other currencies of the Central and Eastern Europe, however the Hungarian currency is forecasted to weaken from the level HUF 251 in 2008 to HUF 314 in 2009 per one Euro to decrease again in 2007 reaching the level of HUF 251.
The unemployment rate in 2008 was at the low level of 7.8%, however, the national unemployment figures tend to hide regional differences. In the Budapest – Gyor – Szekesfehervar triangle, where the majority of foreign investment are concentrated, the lack of qualified employees can be observed and some companies, such as Nokia or Suzuki, employ ethnic Hungarians living on the other side of the Slovakian border, while some others transport employees by bus from the Eastern Hungary. One of the Hungarian economy problems is that the population is not very mobile while most people generally live their whole life within 30km of where they were born. As a result in some villages 70-90% of people are unemployed. With the negative growth rates in coming years he unemployment rate is forecasted to increase to the level of approx. 12.2% in 2009 and 12.6% in 2010.
The basic factors of the investment attractiveness of Hungary are developed infrastructure and focus on advanced technologies and innovation into production of goods representing higher added value. Germany is the most important investor, responsible for 30% of all FDI. Germany is followed by the Netherlands (18%) and Austria (11%). The United States has been the largest non-European investor (5%) and in many cases the investments going through the Netherlands and other European countries also originate from the United States.
It is expected that in 2009 and 2010 the foreign direct investment in Hungary will reach about EUR 1.4bn and EUR 1.5 bn respectively. This will come after the record year of 2008 when foreign direct investments of EUR 3.6 bn were located in Hungary.
The value of exports from Hungary in 2008 has increased by the 4.6% and imports has faced 4% increase compared with 2007. The coming years are forecasted to bring a substantial decrease as values for 2009 show 11% and 13.2% reduction respectively. A slight improvement and again growth in the foreign trade might be witnessed in 2010. One of the reasons for the contraction in the international exchange of Hungary is a concentration of the automotive factories in the country.
Infrastructure
The total length of roads in Hungary is 159,568 km. Paved roads constitute approx. 44% of all roads in Hungary (70,050 km), while unpaved constitute the remaining 56% (89,518 km). The condition of road infrastructure in Hungary is rated as good, although there are only almost 1,000 km of highways. The total length of the railways in Hungary is 7,937 km and railways are one of the most important means of transport in Hungary for long – distance freight transport. Just like road transportation, this sector was privatized. There are 18 airports with paved runway in Hungary, but Ferihegy - Budapest International Airport, is Hungary’s main airport.
In 2007, almost 38% of the population had access to the internet and over 9.9 million people used mobile phones. At the end of 2007, the country’s broadband penetration rate was the highest in the region: 17% and the estimations for 2008 show that this number will reach the level of approx. 19% (1.9m people).
Hungary is landlocked country situated in the middle of Europe, bordering with Austria (366 km), Croatia (329 km), Romania (443 km), Serbia and Montenegro (151 km), Slovakia (677 km) Slovenia (102 km), the Ukraine (103 km).
Hungary is divided in 19 administrative regions – counties. Additionally, the country’s capital – Budapest is independent of any county government. There are also 23 cities with county rights, which authorities have extended powers, however the cities still belong to the territory of the relevant counties and are not independent.
Social
The population of Hungary is 9.96m people, and the number of Hungarians is declining; the population growth rate is -0.25%.
Although Hungary, due to its fluid borders was a multinational country for centuries, the current ethnic mix in Hungary is stable, with the majority ethnic Hungarians – 92.3% (9.23m people). Roma is the biggest minority in Hungary, but their number is only 0.19m (1.9% of the population). Other ethnic groups in Hungary are Slovaks and Ukrainians. The official language in Hungary is Hungarian.
Regarding the education system in Hungary, the administrative control is decentralized and the responsibility is shared among the central (national), the local (regional) and institutional levels. The local governments manage pre-primary, primary and secondary education and they enjoy a fair degree of autonomy in terms of organization, functioning and their budgets. There are both: state and private institutions and they receive funding according to the same criteria. The general phase of education lasts until the age of 16 in Hungary. There are over 30 universities in the country.
Political
Hungary is a democracy with a unicameral Parliament – 386 member National Assembly. The Head of State is the President who is elected through a two-thirds majority vote by Parliament for a term of five years. If no two-thirds majority is reached, then a simple majority is sufficient in the third round of the election. No president may serve more than two terms in office. The role of the President is largely ceremonial, but also includes powers such as appointing high-ranking officials and choosing the date for Parliamentary elections. Nominally, the President is also the Commander in Chief of the Armed Forces. The current President is Dr. László Sólyom, elected on June 7, 2005.
The National Assembly elects a Prime Minister based on the principle of a parliamentary majority, concurrently approving the government program. Parliamentary elections are held every four years, with next elections expected to take place in 2010. The Prime Minister has a leading role in the executive branch in selecting the Cabinet ministers and in retaining the right to dismiss them.
Hungary joined NATO in 1999 and the European Union in 2004.
General Data
Area: 93,030 sq km
Population: 10.1 mn (2008)
Capital city: Budapest
Language: Hungarian
Land boundaries: Austria (366 km), Croatia (329 km), Romania (443 km), Serbia (166 km), Slovakia (676 km), Slovenia (102 km), Ukraine (103 km)
Ethnic groups: Hungarian (92.3%), Roma (1.9%), other (5.8%)
Major economic indicators
| |
2006 |
2007 |
2008 |
2009f |
2010f |
| GDP (EUR bn) |
90.0 |
101.1 |
105.4 |
82.0 |
83.8 |
| Population (mn) |
10.1 |
10.1 |
10.1 |
10.0 |
10.0 |
| GDP per capita (EUR) |
8,932 |
10,048 |
10,483 |
8,166 |
8,361 |
| GDP (constant prices y-o-y %) |
4.1 |
1.1 |
0.5 |
-6.2 |
-2.3 |
| Exports, real, y-o-y (%) |
18.6 |
15.9 |
4.6 |
-11.0 |
2.8 |
| Imports, real, y-o-y (%) |
14.8 |
13.1 |
4.0 |
-13.2 |
2.2 |
| CPI (average, y-o-y %) |
3.9 |
8.0 |
6.2 |
3.9 |
2.6 |
| Central bank reference rate |
8.00 |
7.50 |
10.00 |
9.00 |
7.00 |
| Monthly wage, nominal (EUR) |
648 |
736 |
799 |
638 |
649 |
| Unemployment rate (%) |
7.5 |
7.4 |
7.8 |
12.2 |
12.6 |
| Net FDI (EUR bn) |
0.5 |
0.8 |
3.6 |
1.4 |
1.5 |
| FDI % GDP |
0.6 |
0.8 |
3.4 |
1.8 |
1.8 |
| FX reserves (EUR bn) |
16.4 |
16.4 |
24.0 |
29.0 |
25.0 |
| Exchange rate to USD AVG |
210.28 |
183.33 |
171.09 |
242.06 |
235.74 |
| Exchange rate to EUR AVG |
264.19 |
251.31 |
251.66 |
314.00 |
310.00 |
Last update: Q2 2009
Useful data
Currency: Hungarian Forint (HUF)
Exchange rate: 1 HUF=0.00397 EUR (2008)
Time zone: CET, CEST
Area code: +36
If you would like to find out more on the Hungarian market opportunities please do not hesitate to contact us directly:
tel. (48 12) 292 22 50
fax (48 12) 292 22 99
e-mail: info@pmrconsulting.com
PMR Business Solutions in Hungary
Market reports Hungary
To purchase or find detailed information on PMR Publications reports covering the general economy, construction, retail, pharmaceutical, and ICT sectors in Hungary.
If you are looking for greater detail trust our research and consulting divisions to carry out projects tailored to your business needs.
Consulting in Hungary
PMR Consulting offers a wide range of consulting services in Central and Eastern Europe for foreign companies interested in the region. The typical projects include: competitive intelligence, sourcing, strategic advisory, consulting at foreign direct investments and mergers & acquisitions.
Market research in Hungary
PMR Research offers a full array of qualitative and quantitative research methodologies, providing services such as customer satisfaction studies, brand awareness and brand image research, distribution and competition studies, segmentation and sector analyses.
Case studies for Hungary
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