High Uncertainty on Hungary’s External Markets

There is a high degree of uncertainty in the target markets of the Hungarian economy, and the expected economic policy of the next US President also poses a number of risks for Germany and thus Hungary. Due to the weak economic situation, the German economy is not able to stimulate the Hungarian economy, said András Sávos, President of the German-Hungarian Chamber of Industry and Commerce (DUIHK), on Thursday in Budapest at the presentation of the organization’s autumn business survey.

He added that if promises made during the US presidential election campaign, such as tariff increases, were to be fulfilled, this would be another blow to the German economy, which could "disproportionately" affect Hungary.

He said that in the DUIHK's fall business survey in October 2024, more companies than before – 262 in total – reported on their economic outlook, their own development, the risks affecting their company, the labor market and investment. He noted that the survey was conducted before the US presidential elections and the collapse of the German government, and already showed a high level of uncertainty: companies are pessimistic about both their own business situation and the economic outlook, which is particularly true for the SME sector.

The German economy has been barely growing for years, with growth of 0.4% expected next year after 0.1% this year. The situation is slightly better in Hungary, where GDP is expected to grow by around 3% next year," the DUIHK president said.

Dirk Wölfer, head of communications at DUIHK and author of the study, said that one in two companies considered the outlook for the Hungarian economy to be poor, and only one in ten expected an improvement. "This is a significant deterioration compared to the spring survey," he added.

The picture is more positive when it comes to the assessment of their own business situation: a third of companies rated it as good, while in the services sector the figure was 50%, and one in five (19%) reported that their company's business situation was poor.

In the area of investment, the proportion of firms planning to cut spending is higher than those planning to improve it in virtually all business segments, he said.

A quarter of those surveyed plan to increase their workforce in the next 12 months and one in five (19%) plan to cut back. In industry, the figure is 28%, the report shows.

Firms cited demand developments as the biggest risk factor, with 73% (up from 54% in the spring), a regionally significant figure. This is followed by further increases in labor costs, then economic policy developments, skills shortages and legal certainty. The latter was identified as a risk by 30% of firms.

According to the study, Hungary had the highest increase in labor costs among the countries in the region between 2019 and 2024, at 66%, albeit from a low base.

In a sign that labor market tensions are easing, while firms expected labor cost growth of 11 per cent in the spring survey, this had slowed to 7.7% by October.

Dirk Wölfer said that companies were asked for the first time, to assess their own competitive position. Over the past five years, 38% of them perceived an improvement and 23% a deterioration, the worst in the region. “The majority of companies believe that sustainability requirements strengthen rather than weaken competitiveness," he noted.

He pointed out that firms tend to view Asian investors as competitors, especially industrial firms due to labor market effects.