Apart from the 2008 and 2009 crisis years, the volume of bilateral trade between Spain and Hungary has been on the rise since Hungary’s 2004 accession to the European Union and has more than doubled from that date. Even though the bilateral trade and investment figures of recent years are encouraging, there is ample room for growth in both fields, says Susana de Ibarrondo, Economic and Commercial Counsellor at the Spanish Embassy.
Relations between Spain and Hungary have been built on a solid institutional framework that promotes and facilitates economic relations. “Although, bilateral trade has been traditionally more favorable to Hungary, the balance shows a reduction in the deficit for Spain due to the dynamism of Spanish exports in recent years. Moreover, the increasing volume of bilateral trade, which rose 6.5% in 2018 compared to 2017, reflects a positive development in commercial relations between the two countries,” Susana de Ibarrondo tells Diplomacy&Trade.
Spanish exports to Hungary have shown an encouraging tendency in the 2016-2018 period, reaching nearly EUR 1.8 billion last year, which represents an increase of 5.53% compared to 2017. On the other hand, Spanish imports from Hungary amounted to EUR 2.6 billion, rising 7.13% compared to 2017 figures.
“Our objective for the future is to strengthen trade and economic relations between Hungary and Spain, especially in the sectors where Spain has proven expertise such as infrastructure railway, specialized engineering services and high value-added exports. There is also margin to increase our trade in other sectors like technologies for intensive crops, consumer goods and e-commerce,” the counsellor says.
Automotive, machinery sectors in focus
Spain ranked as Hungary’s 11th largest export partner in 2018 with a share of 2.71% of total Hungarian exports and 15th as supplier, with a share of 1.6% of Hungarian imports. In terms of the sectorial distribution, the main concentration is in the automotive and machinery sectors.
Key products Spain imported from Hungary in 2018 were passenger cars and other automobile vehicles (11.67%), vehicle parts and accessories (10.6%), piston or explosion motors (9.88%) and medicines (3.13%). Concerning Spanish exports to Hungary in 2018, the highest monetary value corresponds to passenger cars and other vehicles, accounting for 20.1% of the total, vehicle parts and accessories (5.51%), piston or explosion motors (4.39%) and pork (3.55%). The textile and fashion sectors are also important in Spanish exports to Hungary. The strengthening of bilateral investment relations could bring important benefits for both countries.
“In terms of investments, both Hungary and Spain offer great opportunities for foreign investors and the strengthening of bilateral economic relations in the field of investment could bring important benefits for the two countries. Spain was the 8th largest recipient of FDI globally last year. This is an indication of the competitive advantages and opportunities our country offers as a destination of foreign direct investments,” according to Susana de Ibarrondo.
Global foreign direct investment inflows to Spain reached a record EUR 55 billion in 2018. However, the EUR 20.2 million stock of Hungarian investments is still modest leaving room for considerable improvement, she notes. Hungary’s investments are concentrated in sectors such as film and video distribution, civil engineering and real estate. “Gross investment flows from Spain to Hungary have been declining since 2007 and have been very low except for the years 2014 and 2017; they continue to be far from the figures reached in the years before the crisis,” Susana de Ibarrondo says. Nevertheless, the total stock of Spanish investments in Hungary reached EUR one billion in 2017. The largest Spanish companies present in Hungary are active in the automotive, electricity supply and the textile-fashion sectors, the most competitive areas of Spanish economy.
Spanish companies also play a significant role in the hotel sector in Hungary. “Hungarian companies could profit from the investment opportunities offered by Spain, especially considering that Spain is one of the most open countries to foreign investments. The OECD ranks Spain as the 10th country
in the world with the least restrictions on foreign investments from a regulatory point of view,” the counsellor says.
Gateway to the world
With 47 million inhabitants and 82 million tourists visiting the country each year, Spain is a key European market for investors and a gateway to non-European countries. Spanish companies are increasingly beginning to act as global players, seeking synergies that allow them to access business opportunities in third countries, particularly those in which they have natural access, such as Latin America. Additionally, the high degree of internationalization of the Spanish economy and its geostrategic location make the country an alluring platform from which to conduct business in the Western Mediterranean, Africa and the Middle East.
The counsellor highlights that Hungary has had a very good track record in attracting foreign investments in recent years, due – among other points – to its strategic position in the center of Europe and the proximity of important markets and production centers. However, one factor affecting foreign investors is the shortage of qualified labor, especially in the automotive and hotel sectors, according to Susana de Ibarrono.
“Hungary’s good economic performance and the positive prospects for 2019 are important in attracting foreign investment and all measures aimed at increasing the productivity and competitiveness of the Hungarian economy are very positive in this regard. Another aspect to be considered regarding foreign investment is the importance of predictability and regulatory stability because the decision to invest abroad is taken by companies based on long-term prospects and these two factors are essential.”