Under the "heavy influence" of the current autocratic regime, Hungary might seem stable but Forgo, Damjanovic & Partners Managing Partner Gabor Damjanovic wonders if the country is prepared to tackle the challenges of the wider economic context.
“Hungary has had a highly autocratic regime at the helm ever since Viktor Orban took power in 2010,” Damjanovic begins. “Looking at the region and the wider Europe or even outside, I’d say that other countries are experiencing similar problems with leadership, with recent elections resulting in major wins for the far right,” he says, pointing towards Poland, Serbia, Israel, Italy, and Sweden. “The entire world seems to be taking a swing towards the far right – and we are all going to have to learn how to adapt.”
With no real changes in the past 12 years, Hungary has had a fairly stable government, according to Damjanovic. “Stability, of course, is favorable, but we still don’t know what the winter will bring and how the situation with the gas and energy prices is going to pan out,” he says. “Taking into account the high worldwide inflation as well – the immediate future is very difficult to predict." He reports that the EU has “halted certain funds coming into Hungary, and the country is looking forward to putting measures in place to unlock these funds. When they got cut, all major infrastructure work and state-run projects have come to a virtual grinding halt."
“For apparently a decade now, we have had access to cheap money in the country and in much of the world – from venture capital, private equity, and other strategic investments. Now, however, that’s over – not just in Hungary – the funds are drying up, and we are all sure to feel it soon, especially when it comes to transactional work and real estate,” Damjanovic continues. “What I see now, with soaring energy prices, high-interest rates, and huge inflation – not to mention the ongoing war in Ukraine and many countries’ shifting to the far right – is something that our generation hasn’t witnessed yet and is reminiscent of the 1920s and 1930s,” he explains.
Focusing on specific sectors, Damjanovic reports that the “automotive sector has been very strong in the past ten years – and the Orban regime has been very keen and successful on getting more automotive production into Hungary.” Another strong sector, boosted partly by the energy crisis, is renewables, “especially solar-powered projects, which are no longer reserved for commercial plants. Residential households are coming into play as well with everybody wanting to have a solar panel on their home due to soaring energy prices and the unknown. The waiting time for this, however, is a few years by now,” he explains.
Finally, Damjanovic reports that the overall status of the Hungarian economy is “under the heavy influence of Viktor Orban – according to unofficial figures often heard, some 30-50% of the economy is either run by the state and/or state-owned companies or by Orban’s family and friends. They have a huge appetite for acquiring companies and expanding their portfolio in different sectors and this drives much of the transactional activity.” Damjanovic says that the situation is “stacked in their favor with even laws sometimes changing so as to fit their needs best.”