Hungary - Market OverviewHungary - Market Overview
Hungary, located in Central Europe with a population of nearly 10 million people, successfully transitioned from a centrally planned economy to a market-based one after the fall of communism in 1989. It is a member of the OECD (1996), NATO (1999), the European Union (2004), and the Schengen Zone (2007). Per capita income is two-thirds that of the EU-28 average and total GDP in 2018 was $155.7 billion. Hungary boasts a strategic location in Europe, access to EU markets, a highly skilled and educated work-force, and a sound infrastructure which have led companies such as GE, Arconic, Blackrock, UPS, Coca-Cola, National Instruments, Microsoft, IBM and many others to locate manufacturing and services facilities in the country. According to Uniworld, there are more than 400 wholly-owned U.S. companies in the country while the Government of Hungary statistics indicate U.S. affiliates employ approximately 105,000 Hungarians. This makes the U.S. the second-largest investor in Hungary after Germany, in terms of employment numbers.
FDI in Hungary has helped modernize industries, create jobs, boost exports, and spur economic growth. Hungary’s cumulative FDI stock since 1989 totals more than $80 billion and is centered around key sectors such as automotive, IT, electronics, logistics, food processing, and more recently shared service center operations. In order to stimulate additional foreign investment, at the start of 2017 the government lowered the corporate tax from 19% to 9%, the lowest in the European Union.
According to U.S. Department of Commerce data, U.S. merchandise exports to Hungary in 2018 totaled $1.75 billion, a slight decrease compared to 2017. Exports were led by machinery, electric machinery, vehicles, electronics, IT equipment, automotive components, industrial engines, and other manufacturing technologies and supplies. (For an overview of the key industries for U.S. exports, please see Chapter 4. Leading Sectors for U.S. Export and Investment). Hungary boasts a significant trade surplus driven by its primary trading partners within the EU (particularly Germany).
Hungary’s GDP annual growth rate was 4.9% in 2018 and is forecast at 3.7% for 2019 according to the European Commission, although in the first quarter the country had a 5.3% GDP growth, the highest within the EU. However, analysts believe that European Union structural funds skew forecasting and that this is not an accurate reflection of economic activity. The unemployment rate decreased significantly from 10.2% in 2013 to 3.4% as of May 2019. Some of this improvement, however, is due to unemployment benefit reforms that require public aid recipients to participate in a ‘public works’ program that the government deems as employment in its official statistics.
Hungary Trade Development and Promotion