Hungary’s economy is currently experiencing a period of high pressure due to its strong performance in terms of wages and output. This is the result of a reduced funding freeze as well as Budapest’s decision to lift its veto on key items, including an aid package for Ukraine. Hungary had previously been on the cusp of a €7.5 billion EU loss of aid money to the country.
Despite its economy being in a high-pressure phase, Hungary appears to be a promising frontier for foreign investors and workers. The country has good infrastructure and is home to large, established companies such as Arconic, UPS, GE, Blackrock, Coca-Cola, IBM, Microsoft, and National Instruments. In fact, U.S. companies employ more than 110,000 people in Hungary. It also places the U.S. as the second largest Hungarian investor after Germany.
Opportunities for Foreign Workers
The Central Bank expects inflation to decline in 2023 because of a slowdown in domestic demand. With inflation slowing down and wages being moderately high, more foreigners are flocking to Hungary are flocking to work in a variety of U.S.-led industries.
Tax cuts have made dealing with labor shortages more attractive when hiring foreign employees. After COVID-19, there was an employment surge that brought the Hungarian employment rate up to 74.1%, with unemployment falling to 3.6%.
Foreign Investment Opportunities
With the Hungarian economy taking a dip, there are also more opportunities for foreign investors. This is thanks to the country’s central location in Europe and the quality of its infrastructure. Hungary has also received 97.8 billion in foreign direct investment aid for the life science, software, automotive and banking sectors. Hungary’s convenient location makes it easy for people from various European nations to work within the country.
Impact of EU Funds
Despite the growth of opportunities for foreign investors and workers in Hungary, the country’s economy still faces some challenges. Both Poland and Hungary are unable to access the Recovery and Resilience Facility (RRF) set up by the EU in 2021 because of disagreements over democratic standards with the European Commission.
Additionally, the EU is keeping €22 billion from Hungary until the country meets criteria related to LGBTQI rights, asylum rights, academic freedoms, and judiciary independence. All these humanitarian factors are becoming more of a concern in the European Union.
If Hungary fails to get the European Union recovery funds, the country’s policy credibility and credit rating could take a hit. The loss of access to EU funding could also renew market pressure. The fallout could also include a decline in the forint’s value.
There is currently no timetable on when the release of the funds from the RRF is expected.
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