The weakness of the domestic and German economy is also reflected in the business climate of German companies in Hungary. No noticeable acceleration in economic growth is expected for 2024 either.
This emerges from the DUIHK economic report presented today, for which the DUIHK surveyed around 250 member companies, but also members of other foreign chambers in Hungary. According to the report, labor market conditions remain a major challenge for companies. There were no major surprises in terms of location quality, but there were both positive and negative changes.
When presenting the economic report, DUIHK President András Sávos said that following very pessimistic economic expectations in the last autumn survey, the bottom may now have been reached, but that no significant growth spurt is expected. This is also shown by the DUIHK investment climate index, which summarizes numerous results of the survey and in the past has usually depicted Hungary’s overall economic development quite accurately. This year the index remained almost exactly at the previous year’s level with a value of +3, which indicates very little growth at best.
Investments and employment at the previous year’s level
Currently, only 14% of participants said the Hungarian economy was in good shape, while 41% described the situation as bad. At least expectations for the current year have improved noticeably. While the balance of positive and negative answers was -51 percentage points in 2022 and -36 percentage points in 2023, this value improved to -4 in the most recent survey – which of course does not indicate strong growth.
The weak economic environment consequently also puts a strain on companies’ performance. Only 27% currently consider their own business situation to be good (in 2023 it was 39%), most (59%) only consider it satisfactory and 14% consider it poor. For the current year, 29% expect better business, but still 25% expect worse business. A very similar picture emerges when it comes to companies’ employment and investment intentions; in both cases it will probably remain at around the same level as the previous year.
Location quality in the regional midfield
In the midst of a weak overall economic environment, it is even more important for companies that at least the location conditions do not create additional burdens. In this context, President Sávos reported that in areas such as legal certainty or the predictability of economic policy, the positive trend of the past few years – which, however, was far from leading to an overall satisfactory assessment – broke off in 2023, and there was another slight deterioration in 2024 was recorded. This year, 60% of those surveyed were more or less dissatisfied with the predictability, and 48% with the legal certainty – similarly poor values were last registered in around 2017.
Sávos added that e.g. B. the practice of emergency regulations, which has been ongoing since 2020, certainly does not contribute to greater planning and predictability. There was also a turnaround when it came to taxes. After satisfaction with the tax system increased steadily from 2012 to 2022, 2023 and once more in 2024 brought weaker satisfaction values once more, which, in the Chamber’s opinion, also has to do with the many sectoral special taxes or the so-called “extra profit taxes”.
In many places the report also provides a comparison with 15 other countries in the Central and Eastern Europe region. Identical surveys were carried out in these countries at the same time, and the responses from a total of over 1,500 participants were evaluated centrally by the DUIHK. The analysis of this data shows that in many areas the differences between the individual countries are rather small. Hungary mostly ranks in the middle, but there are exceptions – both positive and negative. The positive deviations include, for example: B. the tax system, the assessment of the administration or the infrastructure, where Hungary ends up in the group of the top five countries. However, Hungary’s performance is below average in areas such as predictability, combating corruption, procurement transparency and legal certainty. It should be added: The average in these fields is rather poor for the entire region anyway.
Wage increases of 11% expected
Aspects of the labor market regularly take up a lot of space in the DUIHK surveys. Dirk Wölfer, author of the study, recalled that the shortage of skilled workers and wage costs have been the most important challenges for several years. The former is still a problem now, even if the weak economic situation has brought some relief. Nevertheless, 55% of those surveyed are dissatisfied with the labor supply – Hungary is therefore in the regional average. According to the survey, the shortage is particularly noticeable among commercial employees in production, IT specialists and in research and development.
The second challenge is labor costs. Although they are among the lowest in Europe – in 2023 they were only around a third of German wage costs – companies cannot compensate for the sharp increase in recent years with comparable productivity gains. However, passing on sales prices worsens competitiveness, warned Wölfer. For 2024, companies now expect a further increase of 11%, although the inflation rate is likely to be far lower. For comparison, the report shows that an increase of “only” 8.2% is expected in Poland and even 6.7% in the Czech Republic.
Desire for the euro is increasing
Finally, the report also addressed the question of whether Hungary should introduce the euro. This year, 73% of survey participants said yes – the last time the chamber measured such a high value was in 2011. This is explained by the strong exchange rate fluctuations of the past year, which is also supported by the fact that the highest approval rate was reached in 2009 at the height of the financial crisis – at that time 94% of companies wanted the euro.
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