Interview with H.E. Márton Nagy, Minister for National Economy of Hungary

28 Apr Interview with H.E. Márton Nagy, Minister for National Economy of Hungary

BF: Hungary has taken a hands-on approach to economic growth. As Minister for National Economy, what are your top priorities, and how do they align with Hungary’s broader economic strategy?

Nagy: Our goal is to attract and develop key sectors. Despite being a small country, Hungary ranks 11th globally in export complexity. With exports accounting for 85% of GDP, we focus on integrating foreign companies with Hungarian SMEs.

Beyond the EU, we aim to expand global trade. Hungary’s economy thrives in sectors like electric vehicle manufacturing, the military, telecommunications, digital, banking, food, and insurance. We also have a 150-year-old pharmaceutical industry, with Nobel laureates like Katalin Karikó, who contributed to the Pfizer vaccine, and Ferenc Krausz, a pioneer in laser physics. Hungary is an innovation hub, offering foreign investors opportunities in research, development, and production. Stable FDI inflows are key, and we prioritize connecting these investments with domestic businesses.

BF: With Hungary’s economy gaining momentum and strong forecasts for 2026, what specific opportunities do you see for American investors?

Nagy: Of the top 50 U.S. companies, 40 are here, including Flextronics, GE, Bunge, Philip Morris, Ford, and Coca-Cola. While German firms dominate our strong automotive sector—Mercedes, BMW, and Opel operate here—FDI from Korea and China is also growing, particularly related to the electric vehicle value chain. American companies are well integrated, supporting the vehicle industry. However, new opportunities are emerging in digitalization, AI, telecommunications, and the space industry, offering promising areas for collaboration.

BF: How do you see U.S.-Hungary relations evolving under President Trump’s administration, and what new opportunities do you anticipate?

Nagy: The Trump administration is making significant changes, creating new opportunities. One of our main concerns is the Russia-Ukraine conflict—peace is essential for economic and physical security. Stability boosts confidence, encouraging investment and growth.

A major setback was the termination of the double taxation avoidance treaty under the Biden administration, which harms investment. We’re actively working to restore it and are prepared to negotiate with the U.S. Treasury. Another priority is restoring direct flights between Budapest and major U.S. cities like New York, Washington, Chicago, and Los Angeles, which are key for connectivity, both from tourism and business perspecitve.

BF: What is your strategic ambition for Hungary’s digital economy, and where do you see the most potential for U.S.-Hungary collaboration?

Nagy: We are expanding our digital economy through major investments in telecommunications and space technology. We recently bought back Vodafone and merged it with 4iG, a leading Hungarian telecom. 4iG is developing satellite technology, with ongoing construction of a new factory for orbit satellites. Our direct partnership with SpaceX is opening doors for collaboration in the space industry.

Beyond digital infrastructure, Hungary is also seeing significant foreign investment in logistics and manufacturing. Coca-Cola is expanding its logistics centers, and General Electric (GE) Hungary is strengthening our electric manufacturing sector. These developments are possible because Hungary offers political and economic stability, a strong legal and tax environment, and duty-free access to the EU market. Our central location in Eastern Europe and well-developed transport networks make us an ideal logistics hub. Hungary also boasts a highly skilled workforce, competitive wages, and a stable business environment.

BF: With a new Central Bank governor set to take office in March 2025 and economic restructuring underway, how will these changes improve government efficiency?

Nagy: The Central Bank is an independent institution, however efficient economic policy depends on coordination between fiscal and monetary policy, which has been lacking in the past. The new Central Bank leadership will strengthen cooperation with the government to align policies toward common goals. Its primary aim is to bring inflation down to 3% and maintain price stability. Once achieved, it can actively support the government’s broader economic strategy, a role it has not fully played before.

Hungary’s new economic policy has four main priorities. The first is tax reduction, particularly for families, SMEs, and large businesses. Families with more children receive significant tax incentives, while lower business taxes stimulate economic growth. The second is wage convergence, targeting 4-5% real wage growth to boost household income and consumer confidence, with minimum wage adjustments as a key tool.

Affordable housing is another focus. With a 98% homeownership rate, high property prices—especially in Budapest—need to be addressed for long-term economic stability. Lastly, investment promotion remains central. Through HIPA, our investment agency, we provide a one-stop shop for investors, supporting everything from factory openings to financial incentives.

BF: What is the importance of the SMEs in Hungary, and what is the unemployment rate?

Nagy: Hungary’s unemployment rate is 4.5%, one of the lowest in the EU, with an employment rate close to 80%. The remaining 20% are not actively seeking work. Unlike many European countries, Hungary offers unemployment benefits for only three months, which encourages jobseekers to return to work quickly.

SMEs are vital to our economy, employing 88% of the workforce but contributing less than 50% of GDP. About 90% of SMEs are Hungarian-owned, while large corporations are 90% foreign-owned, creating a dual economy. We are strengthening ties between foreign multinationals and Hungarian SMEs through supply chains, joint ventures, and research partnerships to foster a more integrated economy that benefits both sectors and drives growth and innovation.

BF: What do you see as the main strengths of Hungary’s financial sector, and how is the government working to enhance its appeal to investors?

Nagy: Hungary’s financial sector is highly developed, with a balanced mix of 55% Hungarian-owned and 45% foreign banks. It offers a full range of financial services and is well-integrated into the global financial network. Digitalization is advanced, and AI is increasingly used to strengthen financial operations.

For businesses, Hungary provides several funding options. State-owned development banks offer affordable credit, while investment funds provide capital through grants, credit lines, and joint ventures. Grants are especially attractive, offering low-cost funding. Large investments receive subsidies ranging from 5% to 25%, with higher support for less developed areas. The government also focuses on investor-friendly infrastructure, developing modern industrial parks with excellent access to utilities and transportation, including rail and motorways.

BF: Are interest rates on loans and credit high or low?

Nagy: Compared to the Eurozone and the US, Hungary’s rates are slightly higher—about one percentage point more—because the country holds a BBB investment-grade rating rather than a single-A rating. For investment funds, joint ventures with 20-30% minority investments offer an attractive return structure for companies.

BF: Are you interested in public-private partnerships?

Nagy: PPPs in Hungary are primarily used for infrastructure projects, particularly in the construction of hospitals and universities. Private funding is available for state projects, with the government providing financial support over 10 to 15 years, ensuring revenue stability for investors.

BF: What is your final message to our readers about investing in Hungary and working alongside your government to explore opportunities?

Nagy: Rediscover Hungary as a stable and welcoming country within the European Union. It serves as an excellent entry point to the EU market, offering competitive production costs compared to other European nations. The country’s infrastructure is continuously improving. Budapest, in particular, is a fantastic place to live and do business, and those looking to settle, invest, or start a company will find strong support and a high quality of life.