HORIZON

Information, news and

2014 2015 2016 trends concerning
the Hungarian
investment
environment

2016 Q2

1
2014 2015 2016

2
HORIZON
Information, news and
trends concerning
the Hungarian
investment
environment

2016 Q2

3
CONTENT

4
1. Economic Growth 9

2. Development of Business Activity Indices 12

3. State Debt and Budget 14

4. Inflation 15

5. Foreign Direct Investment (FDI) 16

6. Development of Competitiveness 17

7. Foreign Trade 19

8. Employment 22

9. Unemployment 23

10. Salaries 25

11. Labour Costs and Minimum Wage 26

12. Education and Qualifications 27

5
2014 2015 2016

6
 SUMMARY

• According to the forecast of MNB (the Central Bank of Hungary), the economy may
grow 2.8% this year

• Compared to May, both business and consumer expectations worsened somewhat

• This year’s convergence program predicts a state budget deficit of 2.4% for 2017

• Next year, the inflation rate may rise close to the 3.0% inflation goal

• In 2015, the value of global FDI grew by 38.0%

• Hungary advanced two places on the IMD Competitiveness Scoreboard

• Calculated in euros, the Hungarian export expanded by 2.5%, and import achieved
1.1% growth in the first 4 months of 2016

• In the 2016 March-May period, the average number of employed workforce was
4,314,000; 3.6% higher than the year before

• Compared to last year, unemployment rate decreased by 1.6% to 5.5% in the 2016
March-May period

• In the 2016 January-April period, gross personal income improved by 6.1%

compared to the same period of the year before

• A total of 111,162 people – more than last year – submitted applications to higher
education programs starting in September 2016

7
2014 2015 2016

8
1 ECONOMIC
GROWTH
In Q1 of 2016, the GDP volume in Hungary exceeded the volume of last year’s same period
by 0.9%. Services increased, while the industrial sector and the construction industry – with
mild and significant impact respectively – decreased the growth rate, the latter executing
a performance dive of 28%. In contrast, the gross value added by services grew 3.0%, while
the same figure for trade, lodging services and hospitality was 6.4%. Due to the expansion of
IT services, the information & communication sector realized a 3.8% growth in value added.1
Services contributed 1.6 percentage points to the 0.9% GDP growth. At the same time, the
construction industry, the industrial and the agricultural sectors tempered the GDP growth rate
by 0.7%, 0.1% and 0.1% respectively.

On the consumption side, actual household consumption increased by 4.0% year over
year. Gross fixed capital formation fell back by 7.8%, which is mainly due to the decrease in
developments funded from EU sources. Both investments related to procurement of machines
and equipment, and construction investments decreased in volume. 2

G ROW T H O F T H E H U N G A R I A N G D P
(in percentage, compared to the same period of the previous year)
Source: KSH (Hungarian Central Statistical Office)3

3.7 4.1 Mainly due to the

3.4 3.5
3.2 2.7 natural cycles of EU
3.1
2.4
transfers, the rate of
growth in 2016 may
stay slightly below last
0.6 year’s. To dampen the
temporary negative
I. II. III. IV. I. II. III. IV. I. II. III. IV. effect occurring in
2016, the government
2014 2015 increases2016 public
investments, speeds
up access to the
subsidies available in the new EU financial period, raises wages in numerous areas, including
health care, education, social care and public administration. Beginning in 2017, growth may
return to a level above the EU average. The economic growth foretold by the National Central
Bank of Hungary is 2.8% for 2016, and 3.0% for 2017. 4

1 http://www.ksh.hu/gyorstajekoztatok/#/hu/document/gdp1603
2 http://www.ksh.hu/gyorstajekoztatok/#/hu/document/gdp1603
3 http://www.ksh.hu/docs/hun/xstadat/xstadat_evkozi/e_qpt001.html
4 https://www.mnb.hu/letoltes/boritoval-hun-ir-jun.pdf

9
Starting in 2013, Central & Eastern European countries reached the highest growth rates in the
European Union. Loose monetary policy, and the accelerating growth of real wages in the region
have substantially contributed to the dynamic GDP expansion through the rise in household
consumption. Although investment activities of the private sector remained moderate in most
cases, investments also contributed to the growth by virtue of the intense withdrawal of EU
resources. IMF forecasts show that all four countries in the Visegrad Group may see their annual
growth above 2.0% this year, as well as in 2017. 5

In its April 2016 report, the International Monetary Fund6 underlined in connection with
Hungary that it was first and foremost the supportive economic policy, the favourable extrenal
environment, and the high mobilisation ratio of EU resources in recent years that contributed
to the growth of the Hungarian economy. In addition, they emphasised that in 2015, domestic
consumption also significantly supported the expansion, playing a significant part in the 2.9%
annual growth. Then again, the economists of the organisation reported that growth may
decelerate to 2.3% this year, subsequently reviving to 2.5% next year.

G ROW T H F I G U R E S O F T H E V I S EG R A D G RO U P CO U N T R I E S ( FO R EC A ST, % )
IMF OECD EUROPEAN COMMISSION

2016 2017 2016 2017 2016 2017

Hungary 2.3 2.5 1.6 3.1 2.5 2.8
Czech Republic 2.5 2.4 2.4 2.6 2.1 2.6
Poland 3.6 3.6 3.0 3.5 3.7 3.6
Slovakia 3.3 3.4 3.1 3.2 3.2 3.3

Source: IMF World Economic Outlook April 2016,7 OECD Economic Outlook Volume 2016 Issue 1,8 European
Commission European Economic Forecast Spring 20169

According to the spring forecast of the European Commission10, the Hungarian economy may
grow by 2.5% this year, and by 2.8% in 2017. The slowdown from last year’s 2.9% originates
primarily in decreasing EU resources available, and a decline in external demand. These negative
tendencies may somewhat be counterbalanced by the steady increase in domestic demand,
which – as stated by the Commission – may become the engine of growth in the coming years.
Due to the decreasing pace of EU resource mobilisation, the growth contribution of business
and government investments might turn negative.11 The Commission’s analysis mentions the
positive impacts of the Family Home Creation Allowance (CSOK), and the decreased VAT tax
rate for newly built housing, the effects of which are expected to fully unfold in 2017.

In 2015, global economy showed a growth more restrained than earlier expected. The crash of
raw material prices posed a disadvantage to countries exporting these goods, which presented
itself partly in the devaluation of currencies, partly in budget imbalances, and eventually led
to a decrease in the import demand of these countries. Then again, the low-inflation and
low-interest rate environment, together with the improvement in credit processes in the EU
countries may be mentioned as factors brightening global economic outlook.

The Chinese economy undergoes a significant structural transformation, putting more

emphasis on consumption instead of investments and export, and on services instead of

10
industrial production. The growth of the United States – playing central role in the evolution of
global economy – fell slightly short of last year’s expectations, since the net export’s contribution
to growth was in the negative, due to the US dollar gaining strength, and the weak external
demand. However, the steadily favourable labour market processes will probably continue to
support the domestic demand picking up in the next period.

Over the next couple of years, the OECD expects the global economy’s slow recovery continuing.12
Responsible for the restrained growth are the ailing aggregate demand, weak investment and
trade activity, slow growth in productivity, and exhausted reforms. Similar to the year before,
this year may witness a 3.0% growth in the global economy, accelerating to 3.3% in 2017. In
the Eurozone, the loose monetary policy of the ECB may support the long continuing recovery,
while the high unemployment rate and debt level characteristic of the individual countries
continue to pull back on the performance of the zone.13

I N T E R N AT I O N A L G D P G ROW T H R AT E S (%)

2016 2017
IMF OECD IMF OECD
Global Economy 3,2 3,0 3,5 3,3
United States 2,4 1,8 2,5 2,2
Japan 0,5 0,7 -0,1 0,4
Eurozone 1,5 1,6 1,6 1,7
Germany 1,5 1,6 1,6 1,7
China 6,5 6,5 6,2 6,2
India 7,5 7,4 7,5 7,3

Source: IMF World Economic Outlook April 2016,14 OECD Economic Outlook Volume 2016 Issue 1 15

There are still significant differences in economic growth between the individual regions. The
slow recovery from the crisis continued in the developed economies, with the pace of recovery
abating slightly. The growth situation also worsened somewhat in the emerging regions.
Despite the low oil prices and the ECB’s Expanded Asset Purchase Programme, the Eurozone
continues to experience only a moderate recovery in its internal demand. The Central & Eastern
European region witnessed a more muted average growth than in the last quarter, however, the
overall performance of the region continues to be favourable compared to the rest of Europe.
According to the latest Eurostat data, GDP growth turned out to be 3.4% in Slovakia, 2.7% in the
Czech Republic, and 2.5% in Poland, year over year.

5 http://www.imf.org/external/pubs/ft/reo/2016/eur/eng/pdf/rei0516.pdf
6 http://www.imf.org/external/pubs/ft/weo/2016/01/pdf/text.pdf
7 http://www.imf.org/external/pubs/ft/weo/2016/01/pdf/text.pdf
8 http://www.keepeek.com/Digital-Asset-Management/oecd/economics/oecd-economic-outlook-volume-2016-issue-1_eco_outlook-v2016-1-en#page1
9 http://ec.europa.eu/economy_finance/publications/eeip/pdf/ip025_en.pdf
10 http://ec.europa.eu/economy_finance/publications/eeip/pdf/ip025_en.pdf
11 http://www.portfolio.hu/gazdasag/igy_latjak_brusszelbol_magyarorszagot.231253.html
12 http://www.keepeek.com/Digital-Asset-Management/oecd/economics/oecd-economic-outlook-volume-2016-issue-1_eco_outlook-v2016-1-en#page1
13 http://www.portfolio.hu/gazdasag/csapdaba_kerult_a_vilag_azonnal_cselekedni_kell.232665.html
14 http://www.imf.org/external/pubs/ft/weo/2016/01/pdf/text.pdf
15 http://www.keepeek.com/Digital-Asset-Management/oecd/economics/oecd-economic-outlook-volume-2016-issue-1_eco_outlook-v2016-1-en#page1

11
2 DEVELOPMENT OF BUSINESS
ACTIVITY INDICES

Based on the GKI-Erste business activity index, business and consumer expectations worsened
somewhat in June, compared to May. There is a slow decline in business expectations since
the beginning of this year. Taking a closer look, the industrial sector and construction industry
confidence index ascended somewhat, but the trade, and especially the service industry
expectations dropped. A significant fall in the optimism of service industry companies can be
observed; the outlook on both the general course of business, and the expected turnover turned
less favourable.

There was a slight rise in the intention to employ in every sector, except the service industry. In
the trade sector, the willingness to employ hit record high both in May and June. In contrast, the
fear of unemployment gained strength in the population. Apart from construction companies,
there is a restrained expectation of rising prices in every sector, in contrast to the slightly
increased inflation expectation among consumers.

D E V E LO P M E N T O F T H E G K I - E R ST E B U S I N E SS AC T I V I T Y I N D I C E S

15
5
7.5

10
0
7..2
2
5..2
2

5..8
8
4..9
9

5.0
0
4..2
2

5..1

4.6
6
4..4
4

7
4..7
4..6
6

4.6
6
5.
3.7
3.5

2.2
2

2.3
3

5
0.8

1.7
7
-1.7

-1.0
-1.5

-1.8
-1.8

2..8
-0
2..1
2..9

2..9

3..2
3..2

3.1
3..2

3..6

3..7
-2

3.9
3..1

0
-3

-2
-2

-2

-3
-3

-3
-3

-3
-3

-3

-5
5
-10
0
-16.6

-18.9
.

-19.2
-19.6
-19.6

-19.2

0.2
2

-15
5
.
2.6
6
2.4
4

7
2.7

20
3.8
8

3.8
8

211.1.
5.0
0
22

22

-2
22

-2
5.8
8
23

23
-2

-2

-2

-20
25
-2

-2
25

8.3
3
26
6
7
27
-2
-2

-2

28
-2

-2

-25
-30 I. II. III. IV. V. VI. VII. VIII. IX. X. XI. XII. I. II. III. IV. V. VI.

2015 2016

Businesss confidence ind

dex
GKI economic activity index
Consume er con
nfide
ence indexx

Source: GKI16

16 http://www.gki.hu/wp-content/uploads/2016/06/GKI_konj_1606.pdf

12
The consumer confidence index showed a minor decrease in June, after a rise in April and May.
Compared to the assessment in May, people’s prediction concerning their own financial position
a year ahead remained unchanged, but the respondents proclaimed their saving capacity to be
worse.

2014 2015 2016

13
3 S TAT E D E B T
AND BUDGET
Preliminary data shows that the 2015 deficit of the government sector was HUF 679.7 billion,
2.0% of the GDP, 0.3 percentage points lower than the year before (GDP based).17 Thus, last
year’s deficit turned out to be significantly better than the 2.4% deficit originally planned.

The deficit of the central government budget chapter reached HUF 13.2 billion at the end of
May 2016. The central government budget closed with a deficit of HUF 98.9 billion; the social
security funds with a surplus of HUF 48.9 billion; and the segregated state funds with a surplus
of HUF 36.8 billion. The favourable balance of this year’s first five months can be traced back
to the decrease in expenditures (mainly related to EU payments) compared to last year, and
the higher revenues in the main tax types (corporate tax, personal income tax, and social
contributions). This year’s government budget deficit objective is 2.0% of the GDP.18 The MNB
stays more optimistic; according to the central bank’s expectations, this year’s deficit may
amount to somewhere between 1.6-1.8% of the gross domestic product.19

The convergence program published at the end of April 2016 predicts a state budget deficit of
2.4% for 2017, gradually declining to 1.2% by 2020. Parallel to that, the gross government debt
to GDP ratio will shrink to 64.6% by 2020. It may be deemed favourable that due to shrinking
government debt and permanently low interest rate, a continuous decrease in interest spending
between 2016 and 2020 can be foretold. By 2020, the GDP proportionate government interest
spending may reduce to 2.3%, while reaching 3.6% in 2015.20

D E V E LO P M E N T O F STAT E B U D G E T D E F I C I T A N D G RO S S G OV E R N M E N T D E B T
TO G D P R AT I O ( %)

2015
5 -2
2.0 budget deficit
75
5.3
gross public dept
*2
2016
6 -11.9
9
74
4.5
Source: Hungary Convergence Programme
*2017
7 -2
2.4 2016-2020*: forecast
73
3.6
*2
2018
8 -11.8
8
72
2.4
*2
2019
9 -11.5
5
68
8.4
4
*2020 -11.2
2
64
4.6
6

17 http://www.ksh.hu/docs/hun/xftp/stattukor/edp/edp160421.pdf
18 http://akadalymentes.kormany.hu/download/5/7f/b0000/T%C3%A1j%C3%A9koztat%C3%B3%20az%20%C3%A1llamh%C3%A1ztart%C3%A1s%20helyz-
et%C3%A9r%C5%91l%202016_m%C3%A1jus.pdf
19 http://www.mnb.hu/letoltes/boritoval-hun-ir-jun.pdf
20 http://ec.europa.eu/europe2020/pdf/csr2016/cp2016_hungary_hu.pdf

14
 4 I N F L AT I O N

According to the data of the KSH (Hungarian Central Statistical Office), in June 2016, consumer
prices in Hungary were 0.2 % lower on average than in the year before. Food prices decreased
by 0.4 % all in all. The price of sugar and cooking oil increased by 24.1 % and 7.1 %, respectively,
while the average price of food with seasonal price increased by 5%. By contrast, the price of
pork, cheese and milk decreased by 17.2 %, 8.1 % and 6.5 %, respectively. Compared to June
2015, the price of spirits and tobacco products increased by 1.9 %, services became 1.6 % more
expensive on average. The average price of household energy is almost unchanged, with a
reduction of 0.1 % in twelve months. The price of vehicle fuels, included in other items, was 10.4
% less than a year ago.21

In May 2016, the value of the harmonised index of consumer prices used by Eurostat (HICP) was
-0.1% both in the European Union and the Eurozone. The highest inflation rate was registered in
Belgium, where the currency depreciation rate was 1.6%, while Romania measured the lowest
inflation rate: a 3.0% decrease in prices. By examining the countries of the region it can be
stated that deflation occurred in every country, except the Czech Republic. The biggest fall in
prices occurred in Romania and Bulgaria.22

T H E H A R M O N I S E D I N D E X O F CO N S U M E R P R I C E S I N C E N T R A L & E A ST E R N
E U RO P E A N CO U N T R I E S A N D I N T H E E U RO P E A N U N I O N ( M AY 2 016)

Country HICP The most recent MNB report on inflation

Hungary -0.1 of June 2016 foresees a currency
Bulgaria -2.5 depreciation of 0.5% for the current,
Czech Republic 0.0
and 2.6% for the next year. Q1 of 2016
witnessed low-key inflation events, the
Poland -0.4
reason for which was first and foremost
Romania -3.0
the strong price-restraining effect of
Slovakia -0.7
imported inflation. The slight upward
Slovenia -0.5 trend in raw material prices and the
European Union -0.1 significant increase in wages in the
competitive sector are evolving towards
Source: Eurostat an inflation rate that may approach the
medium-term 3.0% target of the central
bank by the first half of 2018. Core
inflation free from the effect of indirect
taxes performs a steady rise, possibly
measuring 1.5% this year, and 2.9% next
year.23
21 http://www.ksh.hu/docs/hun/xftp/gyor/far/far1603.html
22 http://ec.europa.eu/eurostat/documents/2995521/7491954/2-16062016-AP-EN.pdf/261a449f-5bf6-4ceb-be9d-4d38b8eca7c1
23 https://www.mnb.hu/kiadvanyok/jelentesek/inflacios-jelentes/2016-06-23-inflacios-jelentes-2016-junius

15
5 FOREIGN DIRECT
INVESTMENT (FDI)
According to UNCTAD data, global FDI flows jumped 38% in 2015 to reach approximately
USD 1.760 billion. Last year, foreign direct investments reached their highest value since the
2008/2009 crisis. International mergers and acquisitions growing to USD 721 billion last year
(from USD 432 billion in 2014) explain the majority of the improvement.

The outstanding growth registered last year can be in part tracked back to rearrangements
inside conglomerates. The transactions represent significant value in the current accounts,
while they have little effect on the actual operation of the companies. Without the mentioned
big volume, inside conglomerate rearrangements, global FDI flow growth remained a lot more
modest, measuring 15% in the last year.

If we take a look at foreign direct investment distribution by target countries, it can be highlighted
that investments into developed countries doubled in 2015. Foreign direct investments in
developed countries have reached USD 962 billion, representing 55% of global FDI flow last
year. The value of working capital flowing to developing countries showed a lot more modest
growth at 9.0%, closing at USD 765 billion.

UNCTAD predictions show that global FDI flow may shrink by 10-15% in 2016, which reflects the
vulnerability of global economy, the weakness of aggregate demand, the slow economic growth
of countries specializing in raw material export, and a decline in multinational company profits.
However, the international organisation anticipates the upturn of foreign direct investments
already for 2017, and the amount of global FDI-flow may exceed even USD 1,800 billion by
2018.24

T H E T E N M O ST I M P O RTA N T TA RG E T CO U N T R I E S FO R FO R E I G N D I R EC T
I N V E ST M E N T S ( F D I ) I N 2 01 5 ( U S D B I L L I O N ) 25
Source: UNCTAD
2014 2015 Change
United States 107 380 +255%

Hongko
ong 114 175 +54%

China 129 136 +5%

Ireland 31 101 +226%

Netherllands 52 73 +40%

Switzerrland 7 69 +886%

Singapo
ore 68 65 -4%

Brazil 73 65 -11%

Canada 59 49 -17%
24 http://unctad.org/en/PublicationChapters/wir2016_KeyMessage_en.pdf
India 35 44 +26%
25 http://unctad.org/en/PublicationsLibrary/wir2016_en.pdf 5. o.

16
 6 DEVELOPMENT OF
COMPETITIVENESS
According to the IMD Competitiveness Yearbook 2016, Hungary ranks 46th, advancing two
places from rank 48th in 2015.26 All of Hungary’s regional competitors – with the exception of
Poland and Romania – improved their positions, the Czech Republic spearheading the region,
ranking 27th on the global scoreboard.

P L AC E S BA S E D O N T H E L A ST T WO I M D CO M P E T I T I V E N E S S Y E A R B O O K S

COUNTRY RANK 2016 RANK 2015 CHANGE IN RANKING

Czech Republic 27 29 2

Poland 33 33 0

Slovakia 40 46 6

Slovenia 43 49 6

Hungary 46 48 2

Romania 49 47 2

Bulgaria 50 55 5

Source: IMD, World Competitiveness Scoreboard 2016

IMD divides competitiveness into four categories: economic performance, public sector
efficiency, business efficiency and infrastructure. Each of these contains an additional 5
subcategories, with different indicators assigned to each subcategory. Summarising the
ranks of the individual indicators, they can determine all subcategories, larger categories, and
eventually the competitiveness of the whole country. Taking the strengths and weaknesses of
the Hungarian economy into consideration, the IMD Competitiveness Yearbook highlights the
following positive factors:

26 61 developed countries and emerging countries with higher income per capita figures are included in the assessment. Less developed countries are not on the list.

17
 CATEGORIES AND INDICATORS RANK 2016
Economic Performance
Goods Export 6
GDP Proportionate Foreign Trade 6
Public Sector Efficiency
Disposable Income 5
Corporate Tax 12
Business Efficiency
Remuneration of Management 9
Remuneration of Professional Services 12
Infrastructure
Student-Teacher Ratio 5
Number of Women Holding a Degree 7
Source: IMD Competitiveness Profile of Hungary 2016

Based on the competitiveness questionnaire assessment of the IMD, the main appeal of the
Hungarian economy is well-trained workforce, effective labour regulations, and cost-efficiency.
In contrast, respondents claim the legal environment, the company friendly environment,
political stability and predictability to be the least appealing factors.

18
7 FOREIGN TRADE

Total Hungarian goods export amounted to EUR 90.54 billion in 2015, which means a 7.1%
upturn compared to EUR 84.51 billion in 2014. Hungarian goods import arrived at EUR 82.42
billion last year, by rising 5.4%. Due to the more powerful expansion of export, Hungary’s
foreign trade surplus surged 29.4% to EUR 8.12 billion, after the EUR 6.27 billion overage of
2014. In the 2016 January-April period, Hungary’s foreign goods trade turnover expanded by
1.8%, reaching EUR 57.84 EUR. In the first four months of this year, Hungarian export reached
EUR 30.64 billion by rising 2.5%, while Hungarian import closed at EUR 27.19 billion, increasing
1.1% year over year. In the first four months of 2016, Hungary’s foreign trade overage amounted
to EUR 3.45 billion, representing a 14.5% growth compared to the EUR 3.01 billion surplus from
the year before.

E VO L U T I O N O F H U N G A RY ’ S FO R E I G N T R A D E ( E U R B I L L I O N )

PERIOD IMPORT EXPORT SALES TURNOV

VER FOREIGN TRADE
ORT)
(IMPORT + EXPO BALANCE
(EXPORT - IMPORT)

2014 78.23 84.51 162.74

4 6.27

2015 82.42 90.54 172.96

6 8.12

Change 2015/2014 (%) +5.4% +7.1% +6.3% +29.4%

2015 Q1--Q4 26.89 29.90 56.79 3.01

2016 Q1--Q4 27.19 30.64 57.84 3.45

Change 2016 Q1-Q4/2015. Q1-Q4 (%) +1.1% +2.5% +1.8% +14.5%

Source: KSH (Hungarian Central Statistical Office)

In the 2016 January-April period, Hungary conducted nearly 80% of its foreign trade with
European Union Countries. 80.5% of exported goods landed in EU countries, while the import
from the EU made up 78.1% of the total. Our most important trading partner, Germany continued
to strengthen its dominance in the first four months this year; 28.1% of all Hungarian export
targeted Germany, while goods from there comprised 27.0% of total Hungarian import. In terms
of export, France and Romania follow Germany with 4.9% and 4.8%, the volume being EUR 1.49
billion and EUR 1.48 billion respectively. In terms of import, Hungary’s second largest partner is
Austria, with a 6.5% share and a volume of EUR 1.77 billion, while China claims third place with
a share of 5.6% and EUR 1.52 billion in value.

19
T H E 1 0 M O ST I M P O RTA N T I M P O RT A N D E X P O RT PA RT N E R S O F H U N G A RY I N
T H E F I R ST FO U R M O N T H O F 2 01 6 ( E U R M I L L I O N )

IMPORT EXPO
ORT

COUNTRY VALUE PR
ROPORTION COUNTRY VALUE PROPORTION

Germany 7347.3 27.0% Germany 8598.0 28.1%

Austria 1768.5 6.5% France 1494.2 4.9%
China 1519.4 5.6% Romania 1477.4 4.8%
Poland 1471.8 5.4% Austria 1471.0 4.8%
France 1356.7 5.0% Italy 1451.9 4.7%
Netherlands 1335.0 4.9% Slovakia 1443.7 4.7%
Slovakia 1330.4 4.9% Poland 1262.4 4.1%
Czech Republic 1316.4 4.8% Czech Republic 1258.1 4.1%
Italy 1315.0 4.8% United Kingdom 1171.6 3.8%

Romania 807.4 3.0% Spain 1032.1 3.4%

Total imports 27,194.0 100.0% Total exports 30,642.8 100.0%

Source: KSH (Hungarian Central Statistical Office)

On product level, Hungary’s27 foreign trade is mostly dominated by products related to

automotive production; four out of the five most important products in export, and three out of
five in import belong to this sector. The most important Hungarian export products in the first
four months this year were cars and other motor vehicles, their value reaching EUR 3.16 billion,
comprising 10.3% of the whole Hungarian goods export. Second place goes to motor vehicle
parts and accessories, while the third most important goods exported were spark ignition
internal combustion engines. The volume of the former was EUR 1.81 billion (5.9% share),
while the latter added EUR 1.13 billion (3.7% share). The most important products imported to
Hungary were motor vehicle parts and accessories in the 2016 January-April period, providing
6.1% of total import, and EUR 1.66 billion in volume. Landline and digital communication devices
followed with a volume of EUR 0.87 billion (3.2% share), while pharmaceuticals came in third
with EUR 0.81 billion in volume (3.0% share).

27 Based on the four-digit breakdown of the Hungarian Combined Nomenclature of KSH (Hungarian Central Statistical Office)

20
T H E M O ST I M P O RTA N T I M P O RT A N D E X P O RT G O O D S O F H U N G A RY I N T H E
F I R ST FO U R M O N T H O F 2 01 6 ( E U R M I L L I O N )

MOST IMPORTANT EXPORT PRODUCTS VALUE SHARE

8703 Motor cars and other motor vehicles principally designed for the
3160.7 10.3%
transport of persons

8708 Parts and accessories of the motor vehicles 1809.9 5.9%

8407 Spark-ignition, reciprocating or rotary internal combustion piston

1134.4 3.7%
engines
3004 Medicaments, put up in measured doses or in forms or packings for
995.6 3.2%
retail sale
8408 Compression-ignition internal combustion piston engines (diesel or
933.6 3.0%
semi-diesel engines)

TOTAL EXPORT 30,642.8 100.0%

MOST IMPORTANT IMPORT PRODUCTS IMPORT SHARE

8708 Parts and accessories of the motor vehicles 1663.8 6,1%

8517 Telephone sets /carrier frequency and digital/ Radio-telegraphic or

radio-telephonic apparatus; Videophones; parts and accessories of such 872.4 3.2%
articles

3004 Medicaments, put up in measured doses or in forms or packings for

808.1 3.0%
retail sale
8703 Motor cars and other motor vehicles principally designed for the
789.0 2.9%
transport of persons
8409 Parts suitable for use solely or principally with internal combustion
724.8 2.7%
engines

TOTAL IMPORT 27,194.0 100.0%

Source: KSH (Hungarian Central Statistical Office)

21
8 EMPLOYMENT

Q1 of 2016 has seen 4,262,000 people employed – according to KSH workforce assessment
data – which is a 145,000 rise year over year. Employment rate of population between the
ages of 15 and 64 improved to 65.1%, exceeding the figure of the previous year by 2.7%, and
representing an 11 percentage point improvement compared to the rock bottom of Q1 2010.28
In the industrial sector, the largest employer process industry employed 916,400 people, while
trade and motor vehicle repair – standing out from the rest of the services – employed 528,900
people.29

Institutional statistics show that – in the industry sector – the number of full-time employees
employed by businesses with at least 5 employees was 674,300 in the 2016 January-March
period, a 3.5% improvement year over year. The number of full-time employees expanded by
5.2% in the automotive manufacturing sector, 3.0% in metal materials and processed metal
products, and 8.0% in computers, electronics and optical products manufacturing sector. In
automotive manufacturing, the number of part-time employees showed a significant upsurge
(17.1%) year over year, and a total of 95,900 people worked in this sector at companies employing
5 or more people.30

In the 2016 March-May period, the average number of people employed in the population
between the age of 15 and 74 was 4,314,000; rising up 3.6% (+149,000) compared to the same
period of 2015. Workers of the primary labour market in Hungary contributed 3,971,300 to the
number of people employed, while the public employees added 224,300, and people working at
a site outside of Hungary provided another 118,200 employees. The growth comprises 115,600
people from the primary labour market, 24,800 people from the public sector, and 8,400 people
working at a site abroad.

From the age group 15-64 – a population of 6,483,000 –, 4,277,000 belonged to those
employed, their employment rate increasing by 2.8% to 66.0%.31

28 KSH Labour Market Processes 2016 Q1 http://www.ksh.hu/docs/hun/xftp/idoszaki/mpf/mpf1603.pdf

29 KSH STADAT http://www.ksh.hu/docs/hun/xstadat/xstadat_evkozi/e_qlf005b.html
30 KSH Labour Market Processes 2016 Q1, Tables http://www.ksh.hu/apps/shop.kiadvany?p_kiadvany_id=162246&p_temakor_kod=KSH&p_session_
id=363366096888084&p_lang=HU
31 KSH First Release, Employment http://www.ksh.hu/docs/hun/xftp/gyor/fog/fog1605.html and KSH Stadat http://www.ksh.hu/docs/hun/xstadat/
xstadat_evkozi/e_qlf034.html

22
 9 UNEMPLOYMENT

The rise in the number of people employed was accompanied by a fall in the number of people
unemployed. According to KSH information, in Q1 of this year the number of people unemployed
– based on the definition used in the workforce assessment – was 272,800, which is 74,800
less than a year before. In the first quarter, besides an unemployment rate measuring 6.0%
and a youth unemployment rate of 14.2%, the regional differences in unemployment remained
truly significant as well: in contrast to the West-Transdanubian region’s rate of 3.2%, the North-
Plains region shows a rate of 10.7%.32

In Q1 2016 – measured in the section of economy their previous employer belonged to – the
number of unemployed having less than 8 years of working experience dropped by 30.3%
in the industrial sector (25,900 people) and by 18.7% in the services sector (31,400 people),
year over year. Of those having experience in the agricultural sector, the number of registered
unemployed plunged by 32.4% (-4,600).33

In the 2016 March-May period, the number of unemployed people decreased by 69,000 to
251,000, while the unemployment rate declined by 1.6% to 5.5% year over year.34 Data of the
National Employment Service shows that the headcount of registered unemployed tumbled
26.0% (-107,832) to 307,023, at the end of May 2016 year over year. Compared to the previous
month, the number of registered unemployed plummeted by 31,035 (-9.2%).35

Seasonally adjusted data of Eurostat shows that in May 2016 the unemployment rate in the
Eurozone was an average of 10.1%, it was an average 8.6% for the EU (28 States), and only
5,5% in Hungary.36 The 14.4% unemployment rate of the Hungarian population under the age
of 25 is also more favourable than the 18.6% EU average; while Eurostat measured a youth
unemployment rate of 20.7% in the Eurozone, 43.9% in Spain, 50.4% in Greece, and 36.9% in
Italy. The unemployment rate of the EU-28 declined by 1 percentage point compared to May of
the previous year (9.6%).37

32 KSH Labour Market Processes 2016 Q1 http://www.ksh.hu/docs/hun/xftp/idoszaki/mpf/mpf1603.pdf

33 KSH The Number of Unemployed People According to the Section of Economy the Previous Employer Belonged to
http://www.ksh.hu/docs/hun/xstadat/xstadat_evkozi/e_qlf048a.html
34 KSH First Release, Unemployment http://www.ksh.hu/docs/hun/xftp/gyor/mun/mun1605.html
35 National Employment Service, Monthly Detailed Data http://nfsz.munka.hu/engine.aspx?page=afsz_havi_reszletes_adatok_2016
36 The latest data for Hungary is from April.
37 EUROSTAT Statistics Explained http://ec.europa.eu/eurostat/statistics-explained/index.php/Unemployment_statistics

23
U N E M P LOY M E N T R AT E ( % ) 2 01 6 M AY

0 5 10 15 20 25
5

Iceland 3.11
Japan** 3.22
Czech Republic 4.00
Malta 4.11
Germany (until 1990 former territory of the FRG) 4.22
Norway** 4.66
United States 4.77
United Kingdom 5.00
Hungary 5.5
Denmark 6.11
Austria 6.11
Luxembourg 6.22
Netherlands 6.33
Poland 6.33
Estonia** 6.44
Romania 6.66
Sweden 7.2
2
Bulgaria 7.3
3
Ireland 7.88
Lithuania 8.00
Slovenia 8.11
Belgium 8.44
European Union (28 countries) 8.6
Finland 9.00
Turkey* 9.66
Latvia 9.7
7
France 9.99
Slovakia 100.00
Italy 11.5
5
Portugal 11.6
6
Cyprus 122.00
Croatia 13.33
Spain 19
9.88
Greece* 24.11

* 2016 March, ** 2016 April

Source: Eurostat

24
10 SALARIES

In the 2016 January-April period, average gross personal income improved by 6.1% year over
year. The growth was influenced by the 5.7% increase of the minimum wage and the guaranteed
wage minimum, the remuneration developments in the armed services, and the supplementary
allowance paid to employees working in social care. The rise in the net personal incomes –
due to the 1 percentage point drop in the personal income tax – was 7.8%. The average gross
pay of full-time employees was HUF 256,500 on national economy level. The average gross
personal income was the highest in the financial and insurance sector (HUF 542,400); health
care, social care average personal income was the lowest (HUF 150,100); on national economy
level, the average net personal income – calculated without family tax base credit – reached
HUF 170,600. Not including the average personal income figures of those publicly employed,
salaries and wages on a national economy level improved by 6.8%, within which the companies
and entrepreneurs witnessed an increase of 5.3% in personal income. In the first four months of
2016, the gross monthly income of full-time publicly employed reached HUF 79,300.

In the first four months of 2016, on national economy level, the average monthly gross personal
income reached HUF 269,400, within which the average proportion of other income was 4.8%.38

38 KSH First Release, Wages and Salaries http://www.ksh.hu/gyorstajekoztatok/#/hu/document/ker1604

25
11 LABOUR COSTS AND
M I N I M U M WA G E
Labour costs did not change in 2016, hence the social contribution tax rate payable by employ-
ers is 27.0%, while employers also pay a vocational training contribution of 1.5%. The pension
plan contribution payable by employees is 10.0%, their health insurance contribution in kind is
4.0%, their health insurance contribution in cash is 3.0%, and their labour market contribution
is 1.5%.

As of January 1st 2016, the mandatory minimum amount of the basic wage established for full-
time employees (minimum wage) increased by 5.7% to HUF 111,000 (from HUF 105,000). The
guaranteed wage minimum for employees employed in positions requiring at least secondary
school qualifications or secondary vocational qualifications also increased by 5.7% in case of
full-time employment to HUF 129,000 (from HUF 122,000).

D E V E LO P M E N T O F M I N I M U M WAG E S

129 000
122 000

111 000
105 000

Minimum wage in case of positions

Full-time minimum wage
requiring secondary education

2015 2016

26
12 E D U C AT I O N A N D
Q U A L I F I C AT I O N S
A total of 111,162 people – more than last year – submitted applications to the higher education
programs starting in September 2016. Most of the applicants (72,371 people) signed on for
undergraduate programs; 11,201 people chose undivided masters programs; 6,440 students
ticked higher vocational education programs; and 21,150 people holding an undergraduate
degree signed up for a master’s program in the first place. The majority indicated a course in
economic, technological or educational studies.39

In the near future, the structural change of trade & vocational institutions may be expected, in the
course of which both vocational secondary school and vocational school training can provide
completion of secondary education and vocational qualification; the intention is to promote a
successful entry onto the labour market, and – in case of continuing studies – starting higher
education studies.

Promulgation of the package (Act LXXX of 2016) amending Acts concerning the regulation
of education took place on June 23th. The institutions in the public education system will be
transformed pursuant to (Section 19 of) the Act. Hereinafter, the following expressions will have
the following meaning; secondary school: academic secondary schools, secondary vocational
schools and vocational schools; secondary level school: secondary schools, special education
schools, and skill development schools; trade & vocational schools: secondary vocational
schools, vocational schools and special education schools. Pursuant to (Section 20 of) the
Act, the certificate received for completing studies in secondary schools or skill development
schools certifies the completion of secondary education. Furthermore, it qualifies as completion
if the student completed the school years of the vocational school or the special education
school, and passed a complex professional exam. Annex 3 of the Act lists the higher education
institutions recognised by the state in Hungary.40

Prepared by: Economic Analysis Department, HIPA

Budapest, June 28th 2016

39 https://www.felvi.hu/felveteli/ponthatarok_rangsorok/jelentkezok_es_felvettek/jelentkezoi_szamok_16A
40 http://www.kormany.hu/hu/emberi-eroforrasok-miniszteriuma/hirek/benyujtottak-az-oktatasi-torvenyeket-modosito-csomagot
Official Journal of Hungary issue 90, Act LXXX of 2016 on the amendment of Acts concerning the regulation of education and other related Acts http://www.magyarkozlony.
hu/dokumentumok/bdd02206276bb80ba43457265b964ea18f98619c/megtekintes and http://njt.hu/cgi_bin/njt_doc.cgi?docid=196057.323439

27
2014 2015 2016

28
Impressum

Published and distributed by

Hungarian Investment Promotion Agency
H-1055 Budapest, Honvéd utca 20., Hungary
+36 (1) 872 6520
press@hipa.hu
www.hipa.hu

Managing publisher:
Róbert Ésik
President

Managing editor:
Béla Király
Head of Communications Department

Chief Analyst:
Ákos Dani
Head of Economic Analysis Department

Date of finalisation of the manuscript:

28 June 2016

The tables, graphs, data and text in this publication do not constitute an offer. They all originate, either in part or in full, from
surveys, which do not fall within the scope of Act XLVI of 1993 on statistics and are therefore not deemed official statistical
data. The Hungarian Investment Promotion Agency (HIPA) prepared the contents, data and text of the publication with due
care, yet neither HIPA nor any third party takes any responsibility for any errors in the text, content, data or interpretation
and/or any consequential direct, indirect financial or other damage. HIPA does not take any responsibility for any damage or
disadvantage caused by any third party as a result of his/her reference to the content of the publication. Any further utilisation
and edition of this publication is subject to the prior written approval of HIPA exclusively providing that the name of HIPA and
the source(s) are indicated properly.

© Hungarian Investment Promotion Agency

29
Hungarian Investment Promotion Agency
1055 Budapest, Honvéd Street 20.
+36 1 872 6520
info@hipa.hu
www.hipa.hu

30