Success in the Hungarian market is difficult without an in-country representative, agent, or distributor. While marketing tools serve to introduce a product or service, personal visits carry much more weight in Hungary. English, German, and French are often spoken by younger business managers and are more prevalent in larger firms. U.S. companies in Hungary are still advised to have their brochures and information professionally translated and to have a translator on the spot during business meetings if needed.
Hungarian companies can access corporate loans at favorable rates and conditions to boost their sales or expand their manufacturing operations and business activities.
These two factors usually benefit foreign firms. However, the Hungarian National Bank’s Funding for Growth Scheme (NHP) with an interest rate capped at a maximum 2.5% has benefited several local firms, despite some of the lending was initially put into bank deposits or was used to purchase government bonds, taking advantage of the arbitrage opportunity.
U.S. companies can mitigate financing risks and better compete with EU firms by directing their Hungarian customers to services like those of the U.S. Export-Import Bank.
Because business in Hungary is often based upon personal relationships and trust, U.S. exporters are encouraged to visit potential Hungarian customers when presenting a proposal and discuss all conditions of future dealings. Face-to-face meetings are essential to successful long-term business cooperation in Hungary. The U.S. Commercial Service Budapest, through its various services, can help U.S. companies determine the export market potential in Hungary.
Hungarian businesses tend to be price sensitive. U.S. exporters are advised to work with Hungarian representatives on a pricing strategy to keep import costs low. With Hungary’s accession to the European Union in 2004, Hungary adopted the EU’s common external tariff (CXT) rates. Tariff assessment and all other customs procedures take place at the first port of entry into the EU.
Hungary’s Value Added Tax (VAT) sharply increases the price of U.S. exports for Hungarian consumers. The Value-Added Tax (consumption tax) is 27% on most products and services.
Hungary has its own currency the Hungarian Forint (HUF). There is no fixed time to introduce the Euro, it could be adopted in the 2030s.
Foreign companies operating in price-regulated sectors, such as telecom, energy, pharmaceuticals, and retail suffered decreased margins due to sector taxes and other austerity measures, as well as government delays over the past few years.
After joining the EU, the numerous EU-oriented reforms have removed price controls on most utilities. By the early 2000s, the Government of Hungary had largely deregulated utilities, and tried to be closer to the EU pricing levels for electricity, gas and wastewater prices, (this was a significant price increase for households and businesses). In 2013, the Government of Hungary introduced a 10% decrease in retail utility prices to consumers for electricity and gas heating, and another 10% retail price decrease later that year on water and sewage services as part of the country’s public utility rate cut program and that of protecting arable land in the country. Most utilities were re-nationalized including electricity, gas, water, and sewage to provide favorable rates to consumers. In other sectors such as telecommunications, cable or digital TV services, and internet services, stiff competition continues among service providers.
Transparency International (TI) and other anti-corruption watchdogs have highlighted EU-funded development projects as one of the largest sources of corruption in Hungary. A TI study found indices of corruption and overpricing in up to 90% of EU-funded projects. According to the study, EU-funded tenders perform poorly in regard with corruption risks, competitive intensity, and transparency, compared with Hungarian-funded tenders. Besides their positive impact on GDP growth and development, EU funds in Hungary contribute to the system of political favoritism and fuel crony capitalism, the study concluded. Find more at EU Pricing.
According to TI, the Hungarian government is yet to comply with most of the conditions established by European Union institutions to access EU funds. According to Hungarian civil society organizations, the Government had not yet taken adequate steps to fully address the rule of law and human rights concerns raised by the EU, and so numerous issues related to the anti-corruption framework, judicial independence, law-making, the rights of refugees and asylum-seekers, academic freedom and the rights of LGBTQI+ persons remain unresolved. Swift measures are necessary in all these areas to ensure that the country and its citizens are granted access to EU funds.
In December 2022, representatives of Member States in the Council of the European Union and the European Commission suspended and tied to conditions Hungary’s access to EU funds under various procedures due to severe breaches of the rule of law and human rights.
During the conditionality mechanism, aimed at protecting the EU budget, Hungary has committed to adopt 17 anti-corruption measures. However, in December 2022, the Council found that the remedial measures adopted up to that point had significant weaknesses, and therefore decided to suspend 55% of the budgetary commitments under three operational programs regarding Hungary, amounting to approximately EUR 6.3 billion. EUR 3.9 billion loan from the EU’s Recovery and Resilience Plan (RRP) is planned to be used for financing energy infrastructure as well as projects to boost energy efficiency and support the green transition including procurement of e-vehicles for business and further expansion of the e-charging infrastructure. The European Commission and European Council have already approved the RRP.
When approving the country’s Recovery and Resilience Plan (RRP), the Council defined numerous milestones with a rule of law connection, including 27 “super milestones” that Hungary must fully and correctly fulfil before it can receive any payment under the EU’s Recovery and Resilience Facility – EUR 5.8 billion in total. A significant part of the milestones coincides with the measures required under the conditionality mechanism, while four super milestones are aimed at restoring the independence of the judiciary.
Finally, the Commission found in relation to 10 operational programs that Hungary fails to comply with the so-called horizontal enabling condition “effective application and implementation of the Charter of Fundamental Rights” (1) due to deficiencies around judicial independence (as also raised under the RRP), and so Hungary cannot access the respective EU funds until these are addressed. Under certain operational programs, it is also set out as an obstacle to accessing funds that (2) the operation of public interest asset management foundations, many of them maintaining universities, (3) various elements of the Hungarian asylum system and (4) the Hungarian anti-LGBTQI+ law adopted in 2021 also violate the Charter. (source: TI)
In December 2023, the Commission allowed Hungary to access about EUR 10 billion of cohesion funds previously withheld due to concerns about judicial independence, on the basis of judicial reforms enacted in 2023. Roughly EUR 21 billion in EU funds remain blocked due to corruption concerns and other “horizontal enabling conditions” involving the treatment of asylum-seekers, the LGBTQI+ community, and academic freedom