Skip to content

Hungary as a market

Since 1989, Hungary has successfully transformed itself into a market economy, and in 2004 it joined the European Union. The country was seriously hurt by the global financial crises and its economy shrunk during 2009, as well as partly during the following couple of years until 2012. The trend changed to the positive in 2013. In 2015, the Hungarian economy is still showing positive signs (such as positive GDP figures, decreasing unemployment, manageable state budget, etc.), and a solid economic growth is expected by all the major analysts.

Although Hungary's economy seems to slowly recover from the effects of the global financial crisis, some of the main industry segments are only growing thanks to the high level of government spending and the utilization of EU subsidies. The overall business environment is aided by strong business and trade freedom, property rights, investment incentives, while also the traditional bureaucratic field of licensing and public procurement procedures have been streamlined. The tax system has also been recently reformed, including a more simple and beneficial corporate taxation and a flat 16 percent personal income tax rate since 2011.

Hungary's foreign trade policy is in accordance with that of the European Union. The weighted average import tariff rate was 1.0 percent in Hungary in 2013 according to the World Bank. Businesses should not expect more issues compared to any other EU-member state. Non-tariff barriers reflected in EU and Hungarian policy include agricultural and manufacturing subsidies, quotas, import restrictions and bans for some goods and services, market access restrictions in some service sectors, non-transparent and restrictive regulations and standards, and inconsistent regulatory and customs administration among EU members. On the negative note, restrictive biotechnology regulations, non-transparent government procurement, and weak enforcement of intellectual property rights ass to the cost of trade.

Foreign companies account for a large share of manufacturing, telecommunications, and the energy sectors in Hungary. 100 percent foreign ownership is allowed - with the exception of some defence-related industries. Deterrents con often include bureaucracy or the inadequate judicial capacity. Residents and non-residents may hold foreign exchange accounts. There are no restrictions or controls on current transfers or repatriation of profits and no restrictrions on sales of capital market instruments - although there exist some reporting requirements according to EU regulations. Restrictions on foreign land ownership continues to be an issue, though.