Strong points for FDI in Hungary:
- Hungary is widely considered to be the gateway to Central and Southeast Europe, which makes it an attractive market for foreign investment.
- Hungary's labour force is highly educated and skilled with a particular emphasis on engineering, medicine and economics. As of 2015, there is a 99.05% literacy rate, the highest in the region.
- The labour force is also cheap which allows the country to optimally integrate itself within the European production chain and to be considered as an efficient production workshop.
- Despite the brief slowdown in 2015, Hungary continues to be one of the fastest growing EU economies. Its financial system is one of the most developed in the region.
- Despite brief slowdowns in 2008 and 2015, Hungary, with a growth rate of 3.9% in 2017, continues to be one of the most dynamic European economies.
- Well-established infrastructure and a clear legal and regulatory framework give Hungary a favourable environment for sustainable growth.
- Integration in the EU reinforces its political and economic stability, while the support of large international organisations has reduced the effects of the crisis.
Weaknesses for FDI in Hungary:
Although the Hungarian government has succeeded in reducing the debt-to-GDP ratio from 76.9% to 72.9% over the period 2014-2017, significant efforts still have to be made to make it weigh less on its economic development. It is for this purpose that a series of measures have been implemented, such as the creation of new taxes. However, this has had the effect of affecting entire sectors of the economy, particularly the banking, energy and telecommunications sectors. The main critiques of these measures tend to deplore the fact that the government's vision was too short-term and did not envisage structural reforms that were necessary in the long term. Finally, the consequences of the economic crisis of 2008 are still visible ten years later:
- A large part of the population who has applied for foreign currency loans is struggling to repay them; this is due, among other things, to inflation following the crisis
- Banks suffered heavy losses as a result of debt buyback and speculative investments
- Despite recent improvements, the currency has undeniably lost its value
- Low investments in innovation and R & D, a high level of energy dependence and a sometimes fragile banking sector (public and private) put Hungary at risk of a glass ceiling and allow some observers to be alarmed by the capacity of the country to reinvent itself and thus to be able to leave its current economic role
- Cronyism and corruption
Government Measures to Motivate or Restrict FDI
Attracting foreign investment is a priority for the Hungarian Government. The Government established the Hungarian Investment Promotion Agency (HIPA) with the aim of providing professional help to foreign companies intending to invest in Hungary.
In 2013, following a successful return to the global financial markets, Hungary paid the remaining portion of its 2008 Euro financial stabilisation package. In March 2014, the GOH released USD 3 billion in dollar bonds. Given the economic recovery, Standards and Poor's raised Hungary's long-term sovereign debt to stable in March 2014.
The recovery from the financial crisis has been facilitated by the implementation by the state of measures to maintain the attractiveness of the country. The most notable are:
- Special loans and guarantee programmes to compensate for the difficulties of banks in granting loans.
- The improvement of the administrative situation and the reduction of formalities.
- The facilitated acquisition of building permits
- Correction of the exchange rate has made Hungary less expensive than before; whereas productivity, which was already high, has remained at the same level. Because of this, a number of international companies have maintained their investments in the country and have outsourced entire departments such as accounting or call centres.
- In mid-2012, the Government announced its plan to sign 'strategic cooperation agreements' with key investors engaged mainly in production, with the aim that they continue operations in Hungary, and thereby contribute to growth and development.
- As part of the National Development Plan 2014-2020, €6 billion has been allocated for tourism, health, infrastructure and environmental protection programs.