MFA: Strategic opportunities for foreign exporters
Before the onset of the pandemic, Hungary had high GDP growth and started 2020 with a view to continuing this positive trend. During the pandemic, however, some sectors of the Hungarian economy, such as hospitality, tourism and culture, were significantly dampened, and the Hungarian GDP fell by 5.1%. However, after the pandemic subsides, a return to economic growth is expected, which, according to assumptions, should be around 4.0%.
Due to the structure of the Hungarian economy, in which the automotive sector plays a very important role, the future development of the Hungarian economy will depend to a large extent on external factors, including the development of the global automotive market. So far, however, it seems that the pandemic has not stopped the influx of foreign investment in the automotive industry. A new phenomenon of the Hungarian economy is the renewal of the defense industry related to the comprehensive modernization of the Hungarian army as part of the Zrínyi 2026 program.
During the pandemic, the government tried to help the Hungarian economy by, among other things, reducing the tax burden and levies, moratorium on repayments of already closed loans and capping interest on new loans, providing favorable loans and guarantees or non-refundable cash support. Emphasis was also placed on supporting the construction of new and renovation of old apartments.
Businesses affected by the pandemic were provided with support (depending on the sectors), e.g. in the form of compensation for part of the lost profit, wage subsidy or rent forgiveness if the property was fully or majority owned by the state or municipality. The goal was for the volume of aid to reach up to 20% of GDP.
The government placed great emphasis on maintaining employment and tried to support investments in new jobs with financial incentives. Thanks to government support, e.g. the production of various medical devices and pharmaceuticals was started in the country during the pandemic. After the pandemic subsides, the government wants to significantly financially support Hungarian scientific and research capacities, as well as the areas of the green economy, digitization and circular economy. At the same time, the development of the Hungarian countryside should also be financially supported.
Transport industry and infrastructure
Within Hungary, the renewal of the public transport park is expected, including, for example, the oldest line of the Budapest metro. The area of bus transport in particular should undergo a major change, as from January 1, 2022, Hungarian cities with a population of over 25,000 will only be able to purchase electric buses from state funds.
According to allcountrylist, cities are gradually developing strategies or already implementing investments in the area of so-called smart cities, which focus both on IT services (e.g. a smart public transport ticket sales and control system or a smart parking system) and on the supply of components, such as smart public transport stops or smart transitions.
Along with this, the implementation of large infrastructure projects is also planned, such as the “Budapest-Belgrade” high-speed railway, the modernization of the Balaton airport, or the modernization of the railway transshipment from a broad-gauge line to a standard-gauge line in the town of Záhony on the Hungarian-Ukrainian border.
Hungary decided on the construction of two new units of the Paks nuclear power plant (the so-called Paks II project). The construction of both units of 1,200 MW each will be carried out by the Russian Rosatom on the basis of the Hungarian-Russian intergovernmental agreement. Planned investments amount to EUR 1billion. A variety of nuclear and non-nuclear components and services should be in demand. Czech companies participated in the construction and subsequent modernization of already existing blocks (so-called Paks I).
At the same time, the lignite power plant in Mátra should be transformed, in the framework of which the lignite source should be replaced by a gas turbine with a combined cycle capacity of 500 megawatts and a unit for burning RDF biomass with a capacity of 31 megawatts by 2025. Along with this, a photovoltaic solar park with a capacity of 200 megawatts should be built.
Hungary has also passed a law with a commitment to achieve carbon neutrality by 2050, which brings opportunities for various environmental technologies. There is also development in the petrochemical sector, when the MOL company proceeded with a major modernization of its refining facilities. Hungary also plans to strengthen its gas pipeline network.
Hungary has an ambitious military modernization program called “Zrínyi 2026” under which the Hungarian armed forces are making intensive purchases. The Hungarian arms program thus represents an opportunity for Czech companies in the defense industry, some of which have already succeeded in Hungary.
The pandemic has not yet had an impact on arms spending, but the draft budget for 2021, on the contrary, foresees an increase in defense spending. A number of acquisitions are connected with the localization of production directly on Hungarian territory, while the construction of new weapons plants is planned. This also presents opportunities for Czech companies from the field of precision engineering.
Just as in the transport sector, the concept of smart cities is gradually gaining ground in the construction industry, where projects such as smart city lighting or smart benches are implemented. The reduction in the tax rate for new buildings, support for families with children to purchase their own housing and the program announced this year to support the renovation of flats and houses up to a value of approx. EUR 10 thousand also stimulates the residential housing sector, where there are opportunities in the supply of services and components for both exteriors also for interiors (for example, deliveries of bathroom equipment, kitchens, etc.).
It is also necessary to mention that both in the metropolis of Budapest and throughout Hungary there are a large number of historical buildings that are now undergoing renovation. In 2023, the World Championships in Athletics will be held in Hungary, which also brings with it opportunities in the field of modernization of sports infrastructure. The city of Veszprém will then be the European Capital of Culture in the same year, which in turn brings opportunities in the area of modernization of the cultural background.
Healthcare and pharmaceutical industry
The Hungarian government was planning to modernize Hungarian hospital facilities even before the coronavirus pandemic, and the recent crisis has made the topic of healthcare modernization even more relevant. Since 2017, for example, the so-called Healthy Budapest program has been running here, within the framework of which HUF 700 billion (approx. EUR 2 billion) has been allocated to the modernization of healthcare facilities in Budapest and its surroundings.
In response to the pandemic, the government supported the construction of a domestic healthcare industry, which has made Hungary a measure of self-sufficiency in this segment. However, there are still opportunities in the above-mentioned area of modernization of healthcare facilities, including, for example, products of the so-called smart healthcare industry.