Hungarian economy

Hungarian forint at breaking point: Near-historic low against pound sparks concern

hungarian forint euro pound money economy

The Hungarian forint has plummeted to a two-year low against the British pound, with HUF 501.5 required to purchase a single GBP on Monday morning. This is just shy of the all-time record of HUF 502.9, illustrating the domestic currency’s sustained weakness. The euro-forint exchange rate has also breached new lows, with the common European currency trading above HUF 415, marking its weakest performance in two years.

Weakening: Regional and global factors in play

The Hungarian forint’s poor performance extends beyond major currencies, as it also hit unprecedented lows against the Polish złoty and the Czech koruna, Világgazdaság reports. Analysts point to several key factors driving the depreciation. Chief among them is Moody’s recent downgrade of Hungary’s credit rating outlook from stable to negative. This shift, announced late last Friday, has shaken investor confidence, prompting a reassessment of regional holdings.

The downgrade reflects concerns over Hungary’s governance and its potential loss of EU funds, exacerbating fears about the country’s fiscal stability. Simultaneously, global market trends have added to the pressure, with the US dollar gaining strength. The dollar index (DXY), which measures the greenback against a basket of currencies, climbed 0.47%, signalling broad-based demand for safer assets.

Policy dilemma: Balancing rates and stability

Economic experts like Viktor Zsiday, portfolio manager at Citadella Fund, highlight deeper systemic issues. In Portfolio’s article, Zsiday argues that Hungary’s current interest rate policies are insufficient to stabilise the currency. Despite recent rate cuts aimed at stimulating growth, these adjustments have inadvertently fueled the Hungarian forint’s slide.

Zsiday outlines two potential paths forward: continued rate cuts, which risk further depreciation and heightened inflation, or raising rates to attract investors and stabilise the forint. However, both options come with significant economic trade-offs. He also underscores that the root cause of investor apprehension lies in Hungary’s economic policies and political risks, which only the government can address.

Hungarian forint: creator of challenging environments

The weak forint creates a challenging environment for businesses and consumers alike. With Hungary heavily reliant on imports, the currency’s depreciation inflates the cost of goods, fueling domestic inflation. This, coupled with high interest rates, creates a precarious economic environment. Hungary’s monetary policymakers face mounting pressure to restore investor confidence while balancing domestic economic needs. Yet without significant reforms or shifts in fiscal policy, stabilising the forint may remain a distant goal.

At 5 PM, the EUR/HUF exchange rate was above the 415 level with one euro costing HUF 415.07. The GBP/HUF rate had not improved too much by 5 PM, with one pound costing HUF 500.62 at the time of writing this piece. As for the US dollar, one greenback cost HUF 396.73 at 5 PM on Monday.

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Featured image: depositphotos.com

December 2, 2024

Number of jobseekers continues to fall in November

The state secretary for employment policy said on Monday that the number of jobseekers in Hungary stood at 224,914 in November, 1,200 fewer than in the same month a year earlier, citing data from the National Employment Service (NFSZ).

The November figure was the lowest for the month in more than three decades, Sándor Czomba said. The number was down 1,300 from the previous month, he added.

He said the government aims to boost the employment rate by tapping the 300,000-strong labour market reserve. Around 23,000 job seekers have found work as a result of recently launched European Union-funded government placement programmes.

The Minister of State for Employment Policy added that in addition to further employment growth, the government’s priority is to increase the purchasing power of incomes. The government has fulfilled the first point of the New Economic Policy Action Plan, which consists of 21 measures. As a result, the minimum wage will rise by 40 percent by 2027, by 9 percent to 290,800 forints in 2025, by 13 percent to 328,600 forints in 2026, and by 14 percent to 374,600 forints in 2027, setting the stage for a fourfold increase compared to 2010. Related article: Three-year minimum wage agreement set to impact everyone’s pay in Hungary

The government will help employers who employ workers on the minimum wage to secure a wage agreement. They will have to pay the increased social contribution tax “on a sliding scale”, i.e. in 2025 they will have to pay the 2024 rate in 2025, in 2026 the 2025 rate and in 2027 the 2026 rate.

Featured picture: Depositphotos

December 2, 2024

Hungary’s car industry crisis: Are mass layoffs inevitable?

Hungarian industry is increasingly struggling with a phenomenon known as “internal unemployment”. This term describes a situation where companies retain excess labour despite weak order books.

This happened briefly during the 2008-2009 financial crisis, but only for a few months. Now, however, the problem has persisted for almost two years. Companies are dealing with the situation by restructuring and reallocating working hours, but it is uncertain how long this approach will be sustainable. Companies such as Volkswagen in Germany have already made significant job cuts, raising the possibility of similar measures in Hungary.

The car industry crisis and an economic paradox

The car industry, a cornerstone of the Hungarian economy, is facing serious challenges. Slow demand from Germany, increasing competition from China and the ongoing shift to electric vehicles have put the industry under immense pressure.

While Hungary’s GDP contraction is unsurprising in this context, the labour market remains remarkably stable, with unemployment rates holding steady and wages continuing to rise. This apparent contradiction stems from companies’ reluctance to lay off workers. Employers fear that once the downturn eases, it will be difficult to rehire skilled workers, so they prefer to retain staff even in lean times.

The labour market has changed significantly over the past decade. Downsizing and rehiring, once a straightforward process, have become more complicated and costly due to widespread labour shortages and difficulties in recruiting qualified staff. This is particularly true in Central and Eastern Europe, where structural unemployment exacerbates the situation. As a result, companies are prioritising employee retention, even when there is insufficient work to justify current staffing levels.

How car companies in Hungary are coping with the crisis

According to Világgazdaság, Hungarian car manufacturers are adopting different strategies to cope with the current challenges. The Mercedes plant in Kecskemét, for example, has reduced shifts but retained its workforce, while launching retraining programmes. Bosch has taken a similar approach, focusing on retraining and internal redeployment to minimise redundancies despite a global slump in orders. In contrast, the SK On battery plant has already resorted to layoffs and its production future remains uncertain.

Experts warn that the current strategy of retaining workers is not sustainable indefinitely. Unless external demand picks up in the coming months, mass redundancies may become inevitable in Hungary. While some companies, such as Volkswagen in Germany, have already made significant cuts, the question is how long Hungarian companies can maintain their current approach. In the best-case scenario, companies will manage the downturn through retraining and redeployment. The worst-case scenario could see a wave of redundancies, further increasing the economic burden.

The state of the Hungarian industry requires close attention. Although many companies are trying to avoid layoffs, this is only a short-term solution. The coming months will determine whether the economic climate stabilises or worsens, and ultimately when “intra-gate unemployment” could turn into full-blown unemployment. The future of Hungary’s automotive sector and other key industries depends on how effectively companies adapt to the changing global landscape and economic realities.

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December 2, 2024

The Hungarian National Bank has become the world’s 2nd biggest in the gold purchase market

Based on official data, the Hungarian National Bank bought 15 tonnes of gold in the third quarter of this year. That means Hungary has emerged to the 2nd position in the global gold purchase market. Furthermore, the Hungarian National Bank’s gold reserve grew to 110 tonnes, a historic high.

The Hungarian National Bank acquired lots of gold

According to Népszava, in Q3 2024, the Hungarian National Bank became the 2nd strongest player in the global gold purchase market by acquiring 15 tonnes of gold. Poland bought 42 tonnes, while India only had 13 tonnes. Thus, Hungary could precede New Delhi.

Krisfót Juhász, a manager responsible for purchasing investment gold at Conclude Investments Ltd, said the national bank’s acquisition means the rate of gold compared to the country’s FX reserves grew to 14%.

The Hungarian National Bank has become the world's 2nd biggest in the gold purchase market — Photo: MNB

The price of gold gradually increased this year by 30%. The price of gold overcame the gap between USD 1000 and 2000 in just under 15 years, while it took less than 10 months to bridge the gap between USD 2000 and the current peak of almost USD 2800 reached at the end of October. Goldman Sachs believes the price will reach USD 3,000 by the end of next year. Currently, it is at USD 2,650 because of Trump’s victory. Mr Juhász expects that gold prices will not grow significantly because the Trump administration is a supporter of digital currencies like Bitcoin, which reached USD 100,000.

Gold price decreases due to Trump’s victory

Mr Juhász said emerging economies like Azerbaijan, India, Poland, and Singapore invest their saved money into gold acquisition.

In Hungary, people buy gold because of the weak forint. Mr Juhász said that the moment the price of one euro rose above 400, Hungarians started to store the precious metal to secure their savings. He said it had not been rare recently in Hungary to meet buyers who took multiple kilograms of gold home.

We detailed in THIS article that PM Orbán nominated his old ally, Finance Minister Mihály Varga the new governor of the National Bank of Hungary. György Matolcsy’s term will end in March. Mr Varga is an economist and has been an MP since 1990. During the first Orbán government (1998-2002), he served as a finance secretary.

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National Bank of Hungary raises gold reserves to 110 tonnes
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December 1, 2024

Good news from Hungarian economy concerning trade, factory gate prices

Hungary had a EUR 3.544bn surplus in trade of services in the third quarter, data released by the Central Statistics Office (KSH) on Friday show.

Exports of services increased 4.2pc year-on-year to EUR 9.782bn. Imports of services were up 1.9pc at EUR 6.238bn. The tourism surplus reached EUR 1.533bn, the logistics surplus came to EUR 784m and the surplus for business services stood at EUR 621m. Surplus from contract labour services reached EUR 520m.

Trade with other European Union member states accounted for 68pc of Hungary’s service exports and 74pc of its service imports in Q3. Hungary’s biggest partner in trade of services was Germany, accounting for 20pc of turnover. Austria was runner-up, with a 7.8pc share, followed by the United States with 7.6pc.

In the first three quarters of the year, the export of services climbed 4.5pc to EUR 26.266bn, imports increased 3.4pc to EUR 17.393bn and the surplus in trade of services reached EUR 8.872bn.

Hungarian economy — Photo: facebook.com/szijjarto.peter.official

Factory gate prices up 2.6pc in October

Factory gate prices in Hungary were up 2.6pc year-on-year in October, data released by the Central Statistics Office (KSH) on Friday show. Prices for domestic sale fell 0.5pc but export prices climbed 4.1pc. Domestic prices of the manufacturing sector, which have a 60.0pc weight in the PPI, rose 1.2pc year-on-year. Domestic energy prices, which account for 38.6pc of PPI, fell 4.0pc.

Export prices of the manufacturing sector, which have an 82.9pc weight in the PPI, rose 4.0pc, while energy sector export prices, with a 16.7pc weight, climbed 1.4pc. In a month-on-month comparison, factory gate prices were up 1.0pc as prices for domestic sale slipped 0.5pc but export prices increased 1.8pc. In January-October, factory gate prices fell 0.5pc year-on-year as prices for domestic sales dropped 2.6pc and export prices inched up 0.6pc.

Szabó Gear Manufacturing inaugurates HUF 2.3bn production hall

Szabó Gear Manufacturing inaugurated a HUF 2.3bn production hall in Kaposvar (SW Hungary) on Thursday. The company won HUF 407m in conditional European Union funding and around HUF 619m in government support for the investment. Managing director Krisztián Szabó said the company employed around 50 people at present but headcount could climb by 100 with the addition of the production hall.

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Featured image: depositphotos.com

December 1, 2024

Good news: sweets maker Szerencsi BonBon increases production

Sweets maker Szerencsi BonBon inaugurated a HUF 1bn upgrade of its chocolate plant in Szerencs (NE Hungary) on Friday.

The investment was supported by a HUF 500m government grant. The remaining cost was covered from bank credit and internal funds. The ceremony was attended by state secretary of the Finance Ministry András Tállai. Managing director István Takács said most of the investment cost was spent on packaging equipment purchase. Szerencsi BonBon had revenue of HUF 2.6bn last year, public records show.

Szerencsi Bonbon new plant — The inauguration of the new plant. Photo: MTI

Florin winds up HUF 8.5bn investment project

Hungarian sanitiser and cosmetics maker Florin inaugurated an automated warehouse at its base in Szeged (S Hungary) on Friday as the final phase of a multi-year project. Florin invested HUF 8.5bn in upgrades in the past five years, using funding from the European Union, government grants for boosting Hungary’s self-sufficiency in production of healthcare supplies and government grants for large companies, Finance Minister Mihaly Varga said at the event.

Varga noted that in the healthcare industry support programme, 60 Hungarian-owned enterprises implemented HUF 90bn of investments during the pandemic. In the investment support programme for large companies, launched in 2015, some 200 Hungarian enterprises made investments worth almost HUF 600bn and created 4,700 new jobs.

Florin managing director Attila Barta said the company’s base has been completely renovated in the past five years, with old buildings and equipment replaced by new buildings, machinery and an automated warehouse. Florin had HUF 3.9bn revenue in 2022, public records show.

Waberer’s acquires majority stake in Magyar Posta insurers

Listed Hungarian haulier Waberer’s completed an acquisition to acquire 66.925pc of life insurer Magyar Posta Eletbiztosito and non-life insurer Magyar Posta Biztosito, Waberer’s said on Friday. Waberer’s acquired the insurance companies through its unit Gránit Biztosító.

With the expanded service portfolio and customer base, Waberer’s aims to further strengthen its market position and become a leading player on the Hungarian insurance market in the longer term, it said in a statement.

Magyar Posta Biztosito and Magyar Posta Életbiztosító had revenue from premiums of HUF 60.7bn in 2023. The stakes in the insurers were sold by state-owned Corvinus International Investment.

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December 1, 2024

Hungarian Banking Association criticized Orbán cabinet’s tax increases

The Hungarian Banking Association expressed concern about the government measures increasing lenders’ burdens by an additional tens of billions of forints, announced partly without prior consultation, on November 28.

The increase in the windfall profit tax, which was to be phased out based on the government’s previous commitment, and the extension of the retail credit rate freeze will harm Hungary’s international competitiveness, weaken the strategic partnership between the government and the bank sector, and undermine market confidence, the association said on Friday.

The retail credit rate freeze is now being extended for the sixth time, which goes against the requirements of responsible consumer behaviour as it rewards the consumers who, despite a series of early warnings, decided to take the risks of variable-rate loans and did not switch to fixed-rate mortgage loans, they said. When market rates increased and those consumer risks turned to reality, the government expected the banks to take the consequences while many of those consumers would have been able to afford the higher repayments.

They also noted that the government-initiated voluntary 5pc interest rate cap programme for retail mortgages, due to start in April 2025, is viable and can have a meaningful impact under the conditions set by the banks.

“The Hungarian Banking Association remains committed to a stable and predictable economic environment, an essential condition for international competitiveness, and is ready to cooperate with the government in developing meaningful and sustainable solutions to strengthen this,” the association said.

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December 1, 2024

Moody’s credit rating agency warned Hungary changing outlook to negative

Moody’s Ratings affirmed Hungary’s investment-grade sovereign rating, albeit with a negative outlook, at a scheduled review on Friday, the National Economy Ministry said in a statement.

Negative outlook for investments in Hungary

All three big credit rating agencies put Hungary in the investment-grade category, thanks to the country’s stable and resilient economy, the ministry said.

“Hungary’s financing position is stable and secure, and the government is committed to a disciplined fiscal policy and reducing the budget deficit and state debt levels,” it added.

That approach is reflected in the government’s 2025 budget bill which targets a reduction in the fiscal deficit to 3.7pc of GDP. The peacetime budget will contribute to returning the economy to a path of sustainable, high growth, the ministry said.

Hungary’s assessment on international financial markets is favourable, and Hungarian government securities remain popular. Strong investor and market confidence is demonstrated by successful securities auctions and inward FDI, the ministry said, pointing to big investments underway by Chinese companies such as battery makers CATL and SEMCORP and EV maker BYD.

Post-pandemic period was difficult

Hungary’s economy has emerged from a difficult period following the pandemic, the energy crisis and the protracted war in Ukraine, but the weakness of markets in Europe, especially the German economy, has weighed on exports. On the domestic front, indicators point to a turnaround with retail sales and tourism turnover on the rise, showing an increase in consumption, it added.

Government measures to bring down inflation have contributed to the domestic recovery, employment is high and purchasing power is set to continue to rise in 2025 supported by a three-year agreement on minimum wage increase, the ministry said.

The government aims to keep GDP growth over 3pc in 2025 by adopting a policy of economic neutrality and has drafted a New Economic Policy Action Plan that will boost purchasing power, ensure affordable housing and scale up SMEs with the launch of the Demján Sándor Programme, it added.

Finance Ministry also reacted

Moody’s Ratings has affirmed Hungary’s investment-grade sovereign rating, but changed the outlook from stable to negative because of the uncertain international environment and political disputes with Brussels, the Finance Ministry said on Friday.

Finance minister Mihály Varga nominated NBH governor by Viktor Orbán moody's — Photo: MTI

In spite of the war in Ukraine and the weak European economy, all three big credit rating agencies put Hungary in the investment-grade category, and two notches over its rating a decade earlier, the ministry said. Moody’s affirmed its Baa2 rating for Hungary. The rating agency projected Hungary’s economy would grow around 2pc in 2025 and by 3pc a year between 2026 and 2028. Moody’s delivered a positive assessment of Hungary’s falling inflation and the further reduction of state debt levels.

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November 30, 2024

New National Bank governor would “further weaken” the forint, says Gyurcsány’s DK

The opposition Democratic Coalition (DK) and Socialist parties have criticised the prime minister’s decision to nominate Mihaly Varga, the incumbent finance minister, to serve as the next central bank governor, saying he would “further weaken” the forint.

DK spokesman Balázs Barkóczi told an online press conference that by nominating Varga to head the National Bank of Hungary, Viktor Orbán had “essentially sentenced the forint to death”.

He said the forint is currently trading at 412 against the euro, but the 2025 draft budget assumes a EUR/HUF exchange rate of 397.5. Barkoczi insisted that the draft budget and Varga’s nomination were the reason “why the forint is falling again”.

Socialist Party lawmaker Zoltán Vajda said the prime minister should have nominated “an independent leader recognised in the field” to head the central bank instead of a “party politician”.

“It had been suspected for months that Mihály Varga will be the next NBH governor, which is another concerning development when it comes to the future of Hungary’s economy,” Vajda said in a statement.

He said the prime minister’s decision suggested “that the government doesn’t intend to make any changes to the policies that have led to the forint’s depreciation and the weakening of the financial security of Hungarian families”.

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Forint hits new low against the euro as exchange rate surges past 413
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November 30, 2024

Shocking data: Hungary’s dairy farm industry dominated by Filipino, Indian, and Sikh guest workers

Hungary's dairy farm industry dominated by Phillipine, Indian, and Sikh guest workers

According to György Raskó, a Hungarian agricultural economist, 5-600 guest workers from India and the Philippines work in the Hungarian dairy farm industry because it is more difficult to find Hungarian workforce in that sector.

Based on Szeretlek Magyarország, the number of guest workers in the sector is continuously growing. An advantage of employing an Indian guest worker is their religion, which commands them to treat dairy cattle well.

He mentioned Homokszentgyörgy as an example, where the owner could not find Hungarian workforce for the 700 Holstein Friesian dairy cattle and 600 hectares of farmland. Interestingly, they even employ people from South America, e.g. from Guatemala or Venezuela.

Mr Raskó said that employing guest workers in the industry started 20 years ago. Now, mostly Indian, Filipino and Sikh workers satisfy workforce needs. He added that Asians in the dairy industry are trustworthy and hard-working, which is crucial since milking is a 24/7 job, and one cannot be late. Since one of the basic teachings of Hinduism is the love for animals, Hindu workers start with an advantage.

Good salaries, free accommodation

Raskó shared another strange piece of data: Hungarians are no longer keen on keeping livestock. Livestock density is the second lowest in the European Union, with 0.4/hectare. That is because livestock almost disappeared from households and farms and is concentrated in huge compounds.

The salaries are acceptable in the sector, an average of USD 1,000/month. Furthermore, the accommodation is free. They remain here for years to collect as much money as possible. Moreover, in some compounds, family members exchange with each other.

Raskó said Hungary can only employ guest workers in the livestock industry. Such a scheme would not be profitable in the crop husbandry sector. There, they must employ Roma people who are “not trustworthy enough”.

Number of unemployed constantly rising in Hungary

Hungary’s jobless rate for people between the ages of 15 and 74 stood at 4.5pc in October, data released by the Central Statistics Office (KSH) on Friday show.

In absolute terms, there were 219,400 unemployed. The number of employed averaged 4,698,500 in October, down 26,500 from twelve months earlier. KSH noted that the drop was from a high base. For the period August-October, average employment numbers were down 13,500 at 4,703,100. The number of people on the primary employment market edged down to 4,537,000. The number of Hungarians working abroad was little changed at 107,000. The number of people in fostered work programmes was down at 58,000.

The employment rate for the 15-64 age group edged up 0.2pp to 75.3pc. Data from the National Employment Service (NFSZ) show there were 226,000 registered jobseekers at the end of October, unchanged from twelve months earlier.

Jobseekers spent 12.1 months, on average, looking for work, but 48pc of the jobless found new positions in under three months. The percentage of jobless who had been looking for work for at least one year reached 34pc.

Sándor Czomba, the state secretary for employment policy, in a statement issued by the National Economy Ministry said the number of employed people has been at a consistently high level for more than a year, hovering around 4.7m. The minimal decrease seen in October is due to the fact that the number of employed people was at a historically high level last autumn.

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November 29, 2024

BREAKING: New Hungarian airline founded with Chinese help

A new Hungarian airline was founded, and a cooperation agreement was signed on 27 November with Boeing at Beijing’s Chain Expo. Launching a new, Hungary-related airline is such important news that it is strange Minister Péter Szijjártó, who is regularly present on such occasions, was not there and did not even report about the event on his Facebook page.

Chinese founder, Boeing provides 100 new planes

According to Budflyer, a Hungarian air travel news Facebook page, Új Szemle, a Hungarian-Chinese news outlet, wrote about the birth of the new airline and their agreement with Boeing in Beijing. Hungary Airlines CEO is Duan Bo, who signed the documents with Boeing Commercial Sales & Marketing in Greater China VP Gao Sixiang. The agreement is about acquiring 100 new B737 MAX aircraft, but Budflyer and its Chinese source did not mention a deadline for the delivery.

Hungary Airlines plans to open new routes between China and Central Eastern Europe. Furthermore, they would like to use Budapest as their European hub.

The head of the Relations Department of HEPA (Hungarian Export Promotion Agency) said that Hungary Airlines aims to become a global trademark and provide sustainable and effective air travel services. Moreover, they would like to strengthen the relationship between China and Hungary.

Based on the article published by Új Szemle, Hungary Airlines plans to launch its first flight to Hong Kong. However, it is not specified whether that will be a cargo or a passenger flight.

Új Szemle is a Hungarian-Chinese news outlet founded by Geng Jie and her husband in 2000 in Budapest. It has a print and online version and acquired thousands of followers on WeChat in China. The news outlet publishes news about Hungary for the Chinese diaspora living here. The articles are written by Chinese people living in Budapest.

New Hungarian airline without Hungarian governmental help?

Interestingly, Foreign Minister Péter Szijjártó did not post about the launch of a new Hungarian airline despite being very active in communicating such news.

The last time the Hungarian foreign minister wrote about China-related news was on 26 November, when he was happy about Zhejiang’s new plant in Jászfényszaru, which will start mass production next spring, serving a Tesla plant in Germany. Concerning the production of cogwheels and axles, the Chinese company will be the market leader in Europe thanks to its plant in Hungary.

New Hungarian airline péter szijjártó chinese china — Péter Szijjártó with Chinese businessmen. Photo: FB/Szijjártó

The airline changed its name in May

HEPA CEO Gábor Jenei said Hungary’s strategic position, highly-developed infrastructure, innovation and commitment to cooperation make Hungary a natural bridge between the East and the West.

According to portfolio.hu, direct flights are commuting between Budapest and Beijing, Shanghai, Ningbo, and Chongqing. Based on their article, Hungary Airlines was active before in cargo transport. In April, they signed a strategic cooperation agreement with the China Zhejiang Airport Group and the Shenzhen Airport Group about the “Air Silk Road” Hungarian-Chinese cargo hub project.

According to Opten’s data, Hungary Airlines was created in May 2021, and its principal activity was air cargo transport. Before, passenger transport was not included in the company’s activity portfolio. The company has two CEOs, Wu Jiang and Duan Bo.

Interestingly, the company changed its name this May from Universal Translink Airline Hungary Ltd. to Hungary Airlines Ltd. Its owner is the UTL (Beijing) Digital Logistics Co. Ltd., a company registered in Beijing.

Yesterday, we reported that Hungary and China are set to negotiate modifications to their aviation cooperation agreement, aiming to expand the number of flights between the two nations beyond the current 21 per week. Foreign Minister Péter Szijjártó, during his visit to Beijing, highlighted the growing tourist exchange and significant Chinese investments in Hungary as drivers for enhancing air connectivity. The proposed changes could include new routes and increased flight frequencies, strengthening both passenger and cargo traffic.

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November 29, 2024

Debrecen BMW plant construction reaches important milestone

Market Építő has completed buildings and infrastructure with a combined value of EUR 367m at the site of German car maker BMW’s new base in Debrecen (E Hungary), the Hungarian-owned construction company said on Thursday.

Market Építő completed four buildings at the site, including the 140,000sqm manufacturing hall. Market Építő has carried out eight projects at the base under contract from BMW Group and the municipality of Debrecen since 2019.

BMW laid the cornerstone of its plant in Debrecen in the summer of 2022. Production of the fully electric Neue Klasse is set to start there in 2025.

Europe needs competitiveness turnaround, says minister

Europe needs a “competitiveness turnaround”, National Economy Minister Márton Nagy said ahead of a meeting of European Union ministers in charge of competitiveness in Brussels on Thursday. In a statement issued by his ministry, Nagy said the United States and China were ploughing large fiscal resources into the digital and green transitions, and the EU needed to catch up if it didn’t want the competitiveness gap to widen further.

At the Competitiveness Council on Thursday, ministers responsible for the internal market and industry will discuss the future of European competitiveness and better regulation to reduce bureaucracy. The European automotive and battery industries and the biotechnology sector are also topics on the agenda.

2025 year of ‘real’ action to improve competitiveness, minister adds

National Economy Minister Nagy said 2025 needed to be the year of “real activities” to improve European competitiveness after a meeting of the Competitiveness Council in Brussels on Thursday. After chairing the meeting of the ministers in its internal market and industry formation, Nagy warned that Europe’s loss of competitiveness had accelerated in recent years. He highlighted the Budapest Declaration on the New European Competitiveness Deal adopted at an EU summit in the Hungarian capital earlier in November and said it could spur economic growth and the start of the green and digital transitions.

Nagy said the internal market needed to be deepened, regulatory burdens reduced, and the business environment improved, especially for SMEs. Competitiveness must be based on productivity and innovation, not protectionism, he added. He said climate goals had to be harmonised with competitiveness targets, pointing to the debate over the challenges faced by Europe’s vehicle makers. He added that the EU had “rushed” its climate targets without adjusting them to an industrial strategy.

Nagy said the switch to electromobility would have to be made if 2035 climate targets could be achieved. The ministers, Nagy said, debated whether nuclear energy was zero-emissions or not, a definition key to nuclear power’s support from the EU budget.

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November 29, 2024

Hungarian government’s shocking new administrative fee proposal: Here is what to expect!

The Hungarian government has issued a draft regulation for public consultation, proposing significant increases in various administrative fees. The stated aim is to align public revenues with the 2025 fiscal framework while introducing greater transparency in service fees.

According to Portfolio, these changes would have far-reaching implications for sectors such as healthcare, justice, education, intellectual property, and customs. Although rising costs are cited as the reason for the proposal, the scale and impact of these administrative fee increases are expected to vary.

forint wage growth salary money minimum wage — Photo: depositphotos.com

The administrative fee changes

In the healthcare sector, administrative fees for certain reimbursed services will increase. A notable example is the cost of obtaining a medical opinion for public employment or work in the public interest, which would be standardised at HUF 6,000 (EUR 14). While this is not a dramatic increase compared to current rates, the fixed fee is justified by rising operating costs. This adjustment is intended to help healthcare providers cope with inflation and other economic pressures.

Fees related to intellectual property are also under review, with significant increases anticipated. For instance, the cost of patenting biological material will rise from HUF 150,000 (EUR 365) to HUF 202,500 (EUR 493), an increase of 35%. This adjustment is designed to cover administrative costs while simultaneously incentivising improvements in the quality of services.

Licences for orphan works—intellectual creations whose rights holders cannot be found—will also become more expensive. For commercial use, the fee will rise to HUF 124,800 (EUR 304), while non-profit use will cost HUF 40,500 (EUR 98). This tiered pricing system aims to ensure a fairer distribution of costs between commercial and non-commercial users.

Border crossing fees are set to increase as well. For example, the cost of a temporary border crossing permit will double from HUF 3,000 (EUR 7) to HUF 6,000 (EUR 14). Similarly, training fees for customs agents and consultants will rise from HUF 8,000 (EUR 19) to HUF 11,000 (EUR 26). These increases are expected to affect companies involved in foreign trade, as they could raise administrative costs for operators in this sector.

The education sector will not be spared: the licence fee for new vocational textbooks will increase by 20%, from HUF 6,750 (EUR 16) to HUF 8,100 (EUR 19). According to the draft’s explanatory notes, this increase reflects ongoing digitisation efforts and the expansion of curriculum content. While these changes aim to improve the quality and accessibility of educational resources, they could pose financial challenges for schools and training institutions.

Implementation timeline and public feedback

The proposed changes regarding the administrative fee would come into force 31 days after publication. The draft regulation is currently open to public consultation, with stakeholders invited to submit comments to the Department of Administration and Territorial Development by 2nd December. This consultation period provides an opportunity for individuals and organisations to raise concerns about the scale of these fee increases or suggest refinements to the draft regulation.

The overarching objective of these administrative fee increases is to boost public revenues, but their impact on different social groups and sectors remains uncertain. While the rationale—reflecting inflation and covering increased administrative costs—may be justified, the measures could impose additional financial burdens on those affected. The outcomes of the public consultation and the final regulation will determine whether these changes strike the right balance between improving public services and ensuring economic fairness.

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November 28, 2024

Hungarian government extends retail credit rate freeze by 6 months

fun facts about hungary parliament europe credit

The government will extend a rate freeze on retail credit for another six months, Gergely Gulyás, the head of the Prime Minister’s Office, said at a weekly press briefing on Thursday.

Gulyás said phasing out the measure was not yet justified in the current interest rate environment.

Economy minister: Europe needs competitiveness turnaround

Europe needs a “competitiveness turnaround”, National Economy Minister Márton Nagy said ahead of a meeting of European Union ministers in charge of competitiveness in Brussels on Thursday.

In a statement issued by his ministry, Nagy said the United States and China were ploughing large fiscal resources into the digital and green transitions, and the EU needed to catch up if it didn’t want the competitiveness gap to widen further.

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Featured image: depositphotos.com

November 28, 2024

Hungarian banking system declared stable and highly profitable in latest central bank report

Hungarian forint on a downslope again banking

The Hungarian banking system remains “stable” and “resilient to shocks”, while bolstered by “outstandingly high profitability”, Zita Fellner, a senior economist at the National Bank of Hungary (NBH), said presenting a report on Wednesday.

Fellner pointed to the ample liquidity, adequate capitalisation and the high quality of loan portfolios of local lenders, highlighting the key messages in the central bank’s latest Financial Stability Report.

She said the local banking sector would meet regulatory requirements on liquidity and capital adequacy even in the event of a severe shock. Lending capacity of the banking system is “abundant” and no credit supply constraints can be identified, she added.

Local lenders’ earnings reached a historical high of HUF 934bn in the first half of 2024, partly due to volatile and one-off items, she said. NPL ratios in the corporate and retail segments reached historical lows of 3.8pc and 2.3pc, respectively, she added.

She acknowledged that the quality of the corporate loan portfolio could be at risk from the depreciation in the commercial real estate market through bank collateral values, but said those risks were mitigated by the fact that the market may have reached the bottom of the cycle.

Earlier identified risks have abated, she said, noting low jobless rates, low levels of credit among companies under liquidation and the extension of the deadline for borrowers of prenatal baby support credit to fulfil their pledges to have children.

Corporate lending growth continued to slow in H1, to 3.7pc for the whole portfolio and to 0.7pc for the SME segment, mainly due to weak demand, while supply-side conditions were a stimulus to growth, Fellner said. She put the annual growth rate of the corporate loan portfolio around 3pc, in light of the tighter supply of subsidised loan schemes, the lack of an upturn in investment loan demand and the high portfolio of liquid assets.

The retail credit market picked up in H1, supported by stable employment and real wage growth, she said. Home loan volume rose by a factor of 2.5, and the total retail lending portfolio could climb by 9pc for the full year, supported by improving macroeconomic fundamentals, restructured family subsidies and lower long-term yields, she added.

She estimated that around HUF 300bn could be rechanneled from voluntary pension funds to home purchases and renovation under a temporary government measure. Interest on and redemptions of retail government securities is expected to be over HUF 3,000bn in 2025 and around one-fifth of that could be used for big investments, she added.

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November 27, 2024

Forint hits new low against the euro as exchange rate surges past 413

On Wednesday afternoon, the Hungarian forint hit a new low, with the euro exchange rate surpassing 413 EUR/HUF. The currency’s value plummeted to 413.4 before settling slightly at 412.9 by 5 PM. This marks a new milestone, breaking the two-year low set earlier in the week when one euro cost HUF 412.5.

The decline comes amid a drop in European stock markets triggered by a further dip in Germany’s consumer confidence index, Portfolio reports. While the U.S. dollar weakened, economic challenges in Europe heavily impacted the forint, pushing it to this unprecedented level.

The Hungarian currency also showed significant losses against the Polish zloty, reflecting Hungary’s widening economic gap within the region.

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Featured image: depositphotos.com

November 27, 2024

Hungary’s 2025 budget aims for sustainable growth and increased support for families, businesses, and security

The government’s 2025 budget bill adopts a new economic policy that lays the foundations for lasting growth, Finance Minister Mihály Varga told lawmakers in parliament on Wednesday.

Presenting the budget during a plenary debate, Varga said the 2025 budget contained all of the resources necessary to increase further support for families raising children, strengthen businesses, protect regulated utility prices for households, preserve the purchasing power of pensions, guarantee the physical security of the country and to continue to defend Hungary’s borders from illegal migration.

He added that the budget could return the economy to the path of sustainable, high GDP growth while paving the way for dynamic wage growth and an increase in the purchasing power of incomes. He said the government aimed to create more jobs, as well as preserve the 1 million created since 2010. The budget bill assumes 3.4pc GDP growth and 3.2pc average annual invitation. It targets a general government deficit equivalent to 3.7pc of GDP.

Varga said more than 300 new investments, worth a combined HUF 8,100bn, would be launched next year. Those projects will pump HUF 480bn into the economy in 2025, he added.

He said funding had been boosted for all areas from a year earlier. He added that the more than HUF 3,750bn earmarked for support for families raising children was two-and-a-half times the amount allocated in 2010, at current prices. He noted that tax allowances for families raising children would double in two steps, from July 1, 2025 and January 1, 2026. Next year’s allocation for pensions will rise by HUF 655bn to HUF 7,200bn, he said. Since 2010, pension spending has increased by 25pc, adjusted for inflation, he added.

Spending on healthcare will rise by HUF 330bn to HUF 3,717bn, well over the HUF 2,520bn earmarked in 2010, he said. Education expenditures will climb by close to HUF 500bn to HUF 3,876bn, an 88pc increase over the allocation in 2010, adjusted for inflation, he added. Varga said public sector wages would continue to rise in 2025.

The 2025 budget bill targets payouts of more than HUF 3,000bn for European Union-funded projects and over HUF 2,100bn of transfers from Brussels, he said. Hungary will contribute close to HUF 700bn to next year’s EU budget, he added.

Fidesz: 2025 budget ‘will make Hungary successful again’

The adoption of next year’s budget will ensure that Hungary is successful once again, Fidesz MP Erik Bánki said in the debate on the 2025 budget bill in parliament on Wednesday.

The new budget, he said, would provide the basis for Hungary’s economy “to return to the dynamic and sustainable growth path” it enjoyed before the pandemic. The key aims of the government’s new economic policy action plan are to boost the purchasing power of incomes, ensure affordable housing and fortify Hungarian businesses, he said.

Further expanding support systems for Hungarian families was, he added, another priority goal. The budget bill targets annual economic growth of 3.4 percent and assumes inflation averaging 3.2 percent, while the budget deficit is expected at 3.7 percent of GDP, according to the finance minister.

The spokesman in the debate representing the opposition Democratic Coalition, László Varju, said it was doubtful that the proposed budget was either fully legal or sound, and he described it as a “Jack of all trades but master of none”.

He pointed to “massive risks” associated with the budget’s headline figures, insisting that targeted revenues would fall short.

Varju also accused the government of failing to tap EU funds, underestimating the forint-euro exchange rate, and omitting to take external factors into account regarding its growth forecast.

The DK politician further slammed the budget bill for not providing adequate financing for public services such as in the health and education sectors, though it raised the curtain for vast spending before the 2026 elections.

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November 27, 2024

Hungarian MPs decide on important tax laws

The Hungarian parliament has decided on important tax laws:

Family allowance

The amount of family allowance has not changed significantly for a decade and a half, with the last significant increase in 2006. The family allowance is paid from birth until the child is enrolled in a public education or vocational training establishment. The upper age limit is 20 years.

MPs approved increases to tax allowances for families raising children in a vote in parliament on Tuesday. The tax allowances will rise by 50pc from July 1, 2025 and by another 50pc from January 1, 2026. The measure was part of a package of tax changes approved by lawmakers, who voted 114 for it, 42 against it, and 8 abstentions.

Home purchases

The legislation also allows Hungarians to tap their voluntary pension fund accounts for home purchases or renovation during the 2025 calendar year and raises the threshold for tax preferences on employer housing support by HUF 1.8m a year for employees under 35. SZÉP voucher card holders may apply up to half of the top-ups to home renovation expenditures.

New home builds

The legislation extends the 5pc preferential VAT rate on new home builds until the end of 2026, or until the end of 2030 for projects still under construction.

Short-term rentals

The package will raise the room tax on short-term rentals in the capital to HUF 150,000/year. As the owners of the so-called AirBNB flats are Hungarian families, they will be hit hard by this five-fold increase in tax. As we wrote n yesterday, Hungary’s parliament approves workers’ credit and short-term rental permits in Budapest

UPDATE

State Secretary: Government to double tax allowance for families raising children

Tax allowances for families raising children are set to double in line with the tax changes parliament approved in a vote on Tuesday, the state secretary for family affairs said.

“The political left however did not support Hungarian families this time either, they did not vote in favour of doubling the tax allowance that families with children are entitled to,” Zsófia Koncz said on social media in reaction to the vote.

Under the legislation, the tax allowance will increase for families with one child to 15,000 forints (EUR 37), to 30,000 forints with two, and 49,500 with three or more as of July 1 next year, Koncz said. In a phase to follow on January 1, 2026, the allowance is set to reach 20,000 forints per one child, 40,000 forints per two and 66,000 forints for families with three or more children, respectively.

November 26, 2024