About Hungary

Hungary, a country located in Central Eastern Europe with a population of 9.8 million, transitioned from a centrally planned economy to a market-based one since 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 nearly two-thirds that of the EU-28 average and total GDP is $133 billion. Private sector activity accounts for more than 80% of GDP.

Hungary boasts of 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, Alcoa, Morgan Stanley, National Instruments, Microsoft, IBM and many others to establish their facilities in the country, both in manufacturing and services. According to Uniworld, there are more than 400 wholly-owned foreign companies in the country. Many of these companies have discovered that Hungary’s geographic position in Central Europe also offers a strategic logistical hub within the region.

Main Industries in Hungary

The Automotive industry

The automotive industry, in which more than 115,000 persons are employed, generates 21% of the country’s Gross Domestic Product (GDP). At the moment, it is the fastest growing industry in Hungary, sustained by 712 companies with operations in this field. Hungary represents a regional distribution centre for countries in the Center and Eastern Europe, benefiting of a strategic geographical position (member of the European Union and Schengen area) and developed logistics and infrastructure.

The electronics industry

Hungary is the most important electronics provider of the Central and Eastern Europe (CEE), employing more than 112,000 people. The electronics industry represents 22% of the total manufacturing industry in Hungary; at the same time, Hungary is responsible for 26% of the total electronics production in the region.

Pharmaceutical and medical technology industry

The pharmaceutical and medical technology industry in Hungary is the most representative in the CEE, employing more than 15,000 individuals. Hungary’s economy is highly influenced by the pharmaceutical industry, as the industry has developed here from more than one century ago.

Information and communications technology industry

The information and communication technology (ICT) accounts for 10% of the country’s GDP. The ICT market in Hungary is comprised of telecommunications, IT services, outsourcing services and software and hardware products. Hungary stands out in the ICT research and development market, which one of the most important in the region. Research and development in the ICT sector is highly concentrated on software development, providing anti-virus and IT security services.

Agriculture

The Hungarian Agriculture, due to its geographical position and climatic conditions of the country, has thousands of years of history and high quality applicable technologies which consolidates its position among the best agricultures in the world. The excellent agro-ecological characteristics of the country allows the development structures for diverse production. The agriculture, horticulture, pasture and meadow management and rearing animals offer considerable potential. The food industry is mainly made up by micro-enterprises with less than 10 employees (up to 85% of the companies involved in the industry); 47% of the food industry is represented by foreign capital. The products with the highest share of foreign direct investment are: meat and meat products, tea, coffee and soft drinks. Food and beverages industries accounted for 7.6% of the total level of exports (at the level of 2014), mainly destined to countries in the EU space (more than 90%).

WHy Hungary

Favourable location

The easy accessibility of Hungary is often cited as one of its main advantages: it is at the crossroads of four main European transport corridors. Hungary has one of the highest motorway densities in Europe and has five international airports. The country’s location enables companies to have morning calls with Asian countries and afternoon calls with the USA, which makes Hungary a preferred location for shared service centers as well. The climate of the country lacks extremes and can be considered a typical continental influenced climate.

Attractive human capital

Hungary provides a well-qualified workforce at an advantageous cost. The labor force is 4.6 million (in 2017, Q1), the unemployment rate is 4.5% (in 2017, Q1). The minimum wage in Hungary is HUF 127,500 (~EUR 410), the guaranteed minimum wage for skilled workers is HUF 161,000 (~EUR 518), while the average wage is around HUF 287,100 (~EUR 923, between January-April 2017). The rate of personal income tax is 15% and the total rate of employees’ contributions is 18.5%. The employer’s contribution rate is 23.5% (vocational training contribution 1.5% and social contribution tax 22%) and the future trend is for that to decrease.

Competitive tax system

In 2017 a flat corporate income tax rate replaced the former progressive system in Hungary: 9% corporate income tax and no withholding tax on payments (interest, dividend and royalty) made to foreign legal entities.

Investor-friendly legal environment

As a member of the European Union, Hungary has fully harmonized its legal system with European law. New business associations are free to be established in the forms of general partnerships (kkt.), limited partnerships (bt.), limited liability companies (kft.), public limited companies (nyrt.) and private limited companies (zrt.).

Government incentives

The Hungarian government encourages investments and competitiveness through a range of incentives. This state aid can be either refundable or non-refundable. Special attention is offered to the progress of research and development activities and R&D investments.