In our publication Doing Business in Hungary 2019, we wish to give a complex overview to decision makers planning a business investment in Hungary of the regulatory and economic environment of establishing and operating a business association. The summary presents the most important Hungarian tax, economic and legal regulations to help, above all, foreign investors.
Understanding of the fundamental regulatory framework of Hungary and having comprehensive economic background information is essential for formulating the specific questions and business preferences relating to a given industry. Our qualified experts can help in the answering of the arising questions and the selection of a customized business solution whether we are talking about the foundation, acquisition or sale of a company or the efficient operation of a Hungarian business.
In 2018, the Hungarian economy grew at a record rate. The 4.9 percent GDP growth was not only driven by external growth and the influx of EU funds but also by strong internal fiscal and monetary incentives. Consumption was strengthened by the extension of real incomes as well as the recovery of lending while investments were boosted by the accelerated advancing of EU subsidies and the incentives of flat building. The government's policy focused on the elections and the release of incomes was combined with an increasingly relaxed monetary policy that was in contrast with the international trend boosting the economy with low, sometimes negative real interest rates and record weakness of the exchange rate of the forint.
The momentum of the Hungarian economy is expected to break this year: the rate of growth may decrease to 3.7 percent. External growth is slowing down and the world economy is burdened by increasing tensions. The trade war inspired by protectionism and, in particular, its impact on the German automobile industry will throw back Hungary's growth supported by automobile exports. Europe, representing the direct environment and export market of the Hungarian economy, is also facing difficulties due to which the growth rate of the Euro-zone and its strongest economy, Germany may drop to around 1 percent.
For the third year now, the rate of growth of the Hungarian economy exceeded the actual level offered by production factors. The overheating is reflected, above all, in the scarcity of qualified workforce but the high level of utilization of production capacities may also be an obstacle to growth. Employment is at its peak, the reserves in public employment are depleting and the Hungarians working abroad are not expected to return either. The impact of measures taken in order to eliminate bottlenecks threatening long-term development and to improve competitiveness and those of the non-aligned measures proposed by government and central bank programs is difficult to assess. The reserves of extensive growth are practically depleted and further growth may only come from the improvement of productivity.
Digitalization is getting an increasingly important role in Hungarian regulation and in the keeping of contact with authorities. From 2018, an obligation to keep contact electronically was introduced between companies and authorities. The tax and customs authority introduces digitalization in an increasing number of areas in order to make the collection of contributions and taxes efficient and rewards the compliant operation of taxpayers with the benefits represented by a qualified taxpayer status.
The members of RSM Hungary group perform their highly-organized accounting, tax consulting, audit and legal activities in this developing but still challenging economic environment relying on extensive international background support as the only Hungarian members of RSM International. The RSM International network provides the highest level of service and expertise in financial consulting with a presence in 120 countries of the world in 800 offices and employing 42 thousand people.
We hope that the team of authors of RSM Hungary and RSM Legal will be able to provide you substantial support with this publication in the collection of information for investment decision making and in the implementation of the Hungarian business plans of foreign investors.