The share of SMEs within the total number of enterprises is significant both in Hungary and the entire European Union; therefore the Hungarian Government and the EU place special emphasis on assisting the sector. In Hungary, the MNB’s Funding for Growth Scheme 1 and 2 (NHP and NHP+) had succeeded in reversing a negative SME lending growth trend and the stock of loans within the sector has been rising steadily.
In Q3 2015, economic output grew by 2.4 percent year-on-year, thus the pace of growth – due mainly to a high base – has slightly decelerated compared to that of previous quarters. Higher output on the production side was primarily the result of the expansion of the industrial, retail trade, tourism accommodation and catering sectors.
According to data published by the Hungarian Central Statistical Office (KSH), in December 2015 consumer prices rose on average by 0.9 percent year-on-year. In the observed period, the prices of alcoholic beverages and tobacco products saw the biggest increase, while those of automotive fuels decreased to the largest extent. As a whole, in 2015 consumer prices were down by 0.1 percent in comparison to the previous year.
Due mainly to favourable economic environment in Europe as well as a prudent fiscal policy, the growth prospect of the Hungarian economy has been stable. Although growth of the real economy is decelerating and it is expected to be around 2.4 percent, but it is still 0.5 percent above the EU average.
Unless EU member states become capable of finding their own technology specialization profiles, the EU is risking losing out on competitiveness. Even top-performing EU member states have over the past decades kept slipping down on international competitiveness rankings.
In 2014, sales turnover in the national retail trade network as well as in mail order and internet retailing totalled HUF 8.9bn, while the sector recorded volume growth of 5.1 percent. In 2014, average consumer prices fell by 0.2 percent year-on-year. Within that, retail prices in the national retail trade network edged also slightly lower by 0.1 percent. Two regulatory changes may have also contributed to turnover growth.
Currently, one of the major challenges the real estate market is facing lies in the fact that the stock of old residential properties is not being replaced by a new one in a timely manner. Through a proposed amendment, which was adopted by the National Assembly on 15 December 2015, the Government aims to facilitate a change in this aspect. According to the new provision, the rate of VAT payable for new dwelling units is reduced from the prior 27 percent to 5 percent for the period 2016-2019. In addition, the bill contained a number of significant measures to cut related red tape and thus improve the sluggish performance of the construction sector. These measures are expected to lead in the aforementioned period to a sharp rise in the number of new residential properties.
In 2015, the leading index of the Budapest Stock Exchange, the BUX, climbed 40 percent and thus it ranks among the global top five best-performing exchanges in terms of the share price increase of listed companies. Among BSE blue chips, in the observed period share prices increased by some 50 percent at the largest Hungarian bank, OTP, by 25 percent at oil producer MOL, by 20 percent at pharmaceuticals company Richter and by some 21 percent at leading telecom services provider Magyar Telekom.
A major economic development goal is to increase the share of R&D expenditures within Hungary’s GDP. However, boosting state spending on innovation is not sufficient in itself, small- and medium-sized enterprises must also benefit from positive incentives. According to corporate surveys, 85 percent of enterprises in Hungary plan to either keep unchanged or increase the level of R&D expenditures in 2015. The overhaul of tendering processes, the high ratio of patents to investment and the taxation reform of research and development-related activities in 2014 as well as favourable lending conditions are all signalling that economic development objectives will be attainable through improving the innovation performance of enterprises.
According to a recent report by the Hungarian Central Statistical Office (KSH), gradual improvement can be observed concerning the Hungarian information society and e-economy. Actual internet and computer usage data are only slightly below the EU average. It is a key conclusion, however, that corporate internet usage depends largely on the size of enterprises, as micro- and small enterprises tend to be characterized by household instead of corporate coverage statistics.