Executive Search in Hungary – 2016 Outlook
Economic Recovery Gathers Strength
After 5 consecutive years of stagnation/shrinking, the economy has grown for the past two years at 3.5% percent in 2014 and 2.7% in 2015. This is due to a few main factors.
- Growing automotive sector having large OEMs like Audi (11.500 + employee) Mercedes (recent investment 3000 employees + ) Suzuki, GM, and 27 TIER 1-2 suppliers in country.
- Intense use of EU funds mainly in large infrastructure projects.
Some 90% of the value of the GDP comes from exports and more then 70% is created by foreign owned companies. Most of our export is to Germany (Audi, Mercedes, Bosch, etc). Manufacturing represents 23% of GDP and the government has a clear goal to develop it to reach 30%.
The government of Hungary (with elected second time with 2/3 majority – populo-right –conservative wing) which was in the front line of international criticism earlier is being more and more recognized since the targeted economic results were achieved. (GDP growth, decreasing public debt, 2% current budget deficit, historical low prime interest rate in local currency, growing employment etc.)
Some of the crises taxes for industries such as Banking and Telco, have started to decrease. Tax burden on households is being eased to create commercial demand, and to increase competitiveness for industries.
The clear and public goal is to become a country of innovation and production.
The deficit in the Hungarian Budget has been held to below 3% in the last 5 years, compared to 8-9% current deficit levels recorded during the socialist liberal regime. Beside the deficit goal, the new government of Hungary aims to lower decrease the prime rate of the national Bank of Hungary from 8% down to 1.5 % in less then 4 years.
The Hungarian government has been very much against the sanctions against Russia which is a block for our export. The government has announced THE EASTERN OPENING which is to reestablish economic and cultural relations with old COMECOM (Soviet Union, Bulgaria, Czechoslovakia, Hungary, Poland, and Romania) as well as new Eastern partners.
Diplomatic relations have improved with US and Ambassadors have been appointed in both countries.
In Banking the state has acquired two large banks, (GE Capital and Bayerische Landesbank) which are under reorganization, and this trend continues in energy distribution, storage and utility companies, which has created some tension with foreign investors in the past.
Beside the Automotive industry, Hungary continues to remain attractive for contract manufacturing and machinery. It is still an inexpensive location for corporate headquarters and CEE centres and employment is climbing year by year.
GDP per capita has shrunk in USD terms due to devaluation against the US dollar and is now around US$12.500, one third of neighbouring Austria and significantly less than Western Europe. This difference is also reflected in wages and incomes.
Beside low wages Hungarian managers have now more then 25 years experience in modern market economy, and direct a very effective work force both blue collar and white. Hungary has great logistic infrastructure compared to other CEE countries.
Hungarians tend to be more and more flexible and many of them are now working in Western Europe or other zones such as the Middle East.
Number of retained searches, which has dropped dramatically since 2008, has finally started to improve in 2015.
Unemployment is stronger in the 50+ age category, (lack of language skills and flexibility, mobility), and in the eastern parts of the country. Labour cost is still inexpensive, 20-30% cheaper than in Czechia or Slovakia, the reverse of the situation in the mid 1990 years.
The most desired professions are engineers and IT developers, where there are shortages due to their increasing mobility to move abroad.
The Tourism industry is developing rapidly and Budapest is becoming a very popular destination as probably one of the most cosmopolitan towns in CEE.